From Memory to System and Foundry... The Solution to Thaw the Frozen Semiconductor Market

Memory Cold Wave Spreads to Non-Memory
US Nvidia, AMD, Qualcomm Earnings 'Gloomy'
Taiwan TSMC Cuts Orders and Adjusts Wafers
Samsung Electronics and SK Hynix Choose Technical Direct Approach

1Tb Capacity Samsung Electronics 8th Generation V-NAND Image / Provided by Samsung Electronics

[Asia Economy Reporter Kim Pyeonghwa] As the semiconductor market, which has been fluctuating, enters a full-fledged down cycle, all related semiconductor industries are facing difficulties. Not only memory semiconductors, which are highly affected by the economy, but also recently system (non-memory) semiconductors and foundries (semiconductor contract manufacturing) are showing signs of sluggish business conditions. Domestic semiconductor companies such as Samsung Electronics and SK Hynix are choosing a straightforward approach by competing to showcase advanced technologies in order to increase their market influence.

According to the semiconductor industry on the 14th, Nvidia, the No. 1 player in the system semiconductor graphics processing unit (GPU) market, will announce its third-quarter (August to October 2022) results on the 16th (local time). Nvidia's expected third-quarter revenue, as forecasted in the previous quarter's earnings announcement, is $5.9 billion. This is a 16.90% decrease compared to the same period last year ($7.1 billion) and is also lower than the market expectation ($6.9 billion). Nvidia anticipates a decline in its performance due to reduced demand in the upstream industries caused by the economic downturn.

Another system semiconductor leader, American AMD, known for its central processing units (CPU), also recorded lower-than-expected results due to weak customer demand across the PC supply chain. AMD's reported third-quarter revenue (July to September) was $5.57 billion, which increased compared to the same period last year but fell short of the market expectation of $5.62 billion. In the case of Qualcomm, a global leader in mobile application processors (AP), it forecasted a decline in performance starting from fiscal year 2023 Q1 (October to December) due to worsening macroeconomic conditions. Qualcomm's expected revenue for that quarter is between $9.2 billion and $10 billion, lower than the $10.75 billion recorded in the same period last year. Qualcomm also announced a hiring freeze to reduce costs.

As system semiconductors, the demand side, face difficulties, the foundry industry, which is considered relatively less sensitive to economic fluctuations, is also affected. According to multiple Taiwanese media outlets, Taiwan's TSMC, which accounts for more than half of the global foundry market, has recently seen a decrease in orders from fabless (semiconductor design) companies, its customers. Additionally, order cancellations have continued in the 3-nanometer (nm; one billionth of a meter) process scheduled for mass production by the end of the year. In response, TSMC is busy canceling orders for wafers and equipment. The company's capital expenditure (CAPEX) target for this year has already been lowered twice to $36 billion.

Recently launched SK Hynix ultra-low power LPDDR5X / Source=SK Hynix Newsroom

In a situation where difficulties are intensifying across the semiconductor industry, the memory market, in particular, is being evaluated as experiencing an unprecedented level of this down cycle. Choi Doyeon and Namgung Hyun, researchers at Shinhan Investment Corp., explained, "The speed of memory order reductions, which started at the end of Q2 this year, is record-breaking," adding, "Inventory levels are the highest in history." SK Hynix President Noh Jongwon also pointed out in a conference call following the Q3 earnings announcement last month, "This year's memory downturn is so severe that it is unprecedented."

In this situation, the crisis response strategies presented by Samsung Electronics and SK Hynix are completely opposite. While SK Hynix has announced production cuts and investment reductions to balance market supply and demand, Samsung Electronics has revealed investment plans without production cuts. However, both companies are actively securing advanced technologies from a long-term perspective. They are choosing a straightforward approach to strengthen competitiveness through technological advancement.

Samsung Electronics announced this month the mass production of the world's highest capacity and highest layer count (around 230 layers) 8th-generation V-NAND. This demonstrated a technological gap in the NAND flash market, where stacking competition is active as a representative memory product. In the foundry sector, Samsung officially announced mass production of the 1.4 nm process (scheduled for 2027), the first in the industry. Heo Seonghoe, Vice President of Samsung Electronics Memory Division, stated, "We will satisfy market demand with 8th-generation V-NAND and provide differentiated products and solutions."

SK Hynix recently started sales of low-power double data rate (LPDDR) 5X for mobile use, which introduced the next-generation process (HKMG) for the first time, reducing power consumption while increasing processing speed. Last month, SK Hynix developed the Computational Memory Solution (CMS), which integrates computing functions into memory based on the next-generation interconnect technology CXL, the first in the industry. Park Kyung, Vice President of SK Hynix, said, "CXL is a new opportunity for memory companies," and pledged to continue follow-up research to improve performance in the future.

This content was produced with the assistance of AI translation services.