"Samsung to Cut DRAM Production Reduction to 15% in Q1... Semiconductor Spring Breeze Blows"

Samsung Electronics is expected to significantly reduce its DRAM production cuts as early as the first quarter of this year. This is analyzed to be a response to market demand as DRAM prices have been steadily rising recently and sales are increasing mainly for high-value-added products. Attention is focused on whether Samsung Electronics, which began production cuts in April last year, will follow a normalization process in about a year.

According to the industry on the 5th, Meritz Securities recently stated in a report that "Samsung Electronics will reduce the scale of production cuts from 35% to around 15% within the first quarter." This is the first report to mention the scale of production cuts in specific figures.

Kim Sun-woo, a Meritz Securities team leader, explained, "It is estimated that Samsung Electronics is reducing the scale of DRAM production cuts faster than expected recently," adding, "They are increasing wafer input mainly for 1znm (10-nanometer class) at not only the 16·17L (Hwaseong) but also the P2·3 (Pyeongtaek) lines." This means that chip production will also increase as wafer input used in semiconductor manufacturing rises.

The reduction in production cuts is expected to be driven by demand for low-power DRAM (LPDDR5). Kim said, "Mobile demand is stronger than expected," and "LPDDR5 demand is rapidly increasing."

Samsung Electronics HBM3E DRAM.
Photo by Samsung Electronics
Image source: Yonhap News

원본보기 아이콘

Samsung Electronics' reduction of production cuts is expected to have symbolic meaning even in the recently recovering semiconductor market. The reduction in production cuts can be interpreted as a sign that the market is following a normalization process. When the semiconductor market collapsed, Samsung Electronics mainly cut production of general-purpose (legacy) products with large volumes starting in April last year. As a result of the production cuts, semiconductor prices bottomed out in the fourth quarter of the same year and shifted to an upward trend.

In fact, DRAM prices have been maintaining an upward trend recently. According to TrendForce, mobile DRAM and NAND flash prices are expected to rise by 18-23%, and PC DRAM by 10-15% in January this year. Both general-purpose PC DRAM and NAND flash general-purpose products for memory cards and USB showed an upward trend for three consecutive months starting in October. Market research firm Omdia also forecasts that DRAM prices will rise by 11% in the first quarter of this year.

The increase in exports can also be seen as a signal of global semiconductor demand recovery. Smartphone and PC companies, having completed inventory adjustments, appear to be rushing to purchase DRAM recently. In December, South Korea's semiconductor export volume reached $11.03 billion (approximately 14.3 trillion KRW), marking the highest monthly annual performance. This is an increase of 21.8% compared to the same month last year and about 15% more than November.

However, it is expected to take some time before Samsung Electronics' operating rate fully normalizes. Production of DDR4, which has relatively lower prices and higher inventory, is expected to maintain a reduction trend. NAND flash is still in a difficult situation. Although NAND prices have recently shown a slight increase similar to DRAM, the industry views this as a phenomenon caused by extreme supply cuts rather than demand recovery. It is estimated that NAND production cuts will be actively discussed in the second half of this year when demand sentiment for IT devices improves and smartphones equipped with 'on-device AI' appear.

A source familiar with Samsung Electronics said about the possibility of reducing production cuts, "It is difficult to give an exact number because wafer input varies every month."

Samsung Electronics is expected to expand facility investment this year to actively increase the proportion of high-value-added DRAM. Even during the semiconductor downturn last year, Samsung Electronics invested 47.5 trillion KRW in the semiconductor sector alone. This year, it is expected to focus on mass production of the 32-gigabit (Gb) DDR5 DRAM developed last year, expand the proportion of high-bandwidth memory (HBM)3 and HBM3E, and further increase the scale of facility investment.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.