Hit by falling chip prices and sluggish demand for SET products, major memory chip makers are rushing to produce less. These companies are also looking to put off capital investment, a move that will have industry-wide impact, including on suppliers.
On July 25, SK hynix CFO Cha Jin-seok said the company has decided to “adjust” production volume to address these and other changing market conditions.
Beginning in the fourth quarter, the company plans to cut down on DRAM production. Within the latter half of the year, SK hynix also plans to alter some of the DRAM production capacity at its M10 plant in Icheon to mass produce CMOS image sensors.
For NAND Flash, the company will cut down on wafer input by at least 15%. This is by a bigger clip than the 10% reduction it pledged in the previous quarter.
“Adjustments are also likely to our plans for adding a clean room in the M15 Cheongju plant and for installing equipment in the M16 plant in Icheon previously scheduled for the latter half of this year,” said Cha.
He added that next year, the SK unit would invest far less.
“Persistently low demand has caused inventory to pile up at major memory chip companies like Samsung Electronics,” said the CFO. “Samsung seems to have decided it’s better to stop producing, rather than selling below the market price.”
Micron Technology of the US has already begun to slash production early this year. While announcing its earnings for the period between May and May this year on June 25, Micron said it would cut its DRAM and NAND Flash wafer input by 5% and 10%, respectively. The firm also said it would drastically cut capital investment by 2020.
The situation at Samsung Electronics is not much different.
In April, Samsung had indicated it would adjust production to address a glut in memory supply. At the time, Jeon Se-won, vice president of Samsung’s memory strategic marketing team said the firm was looking to streamline all semiconductor lines to stabilize inventory.
He added that the streamlining, while not the first of its kind, would be aggressive and designed to affect production volume.
These remarks came after years of ramping up supply.
When Samsung announces its second quarter earnings at the end of this month, it may officially state its plans to cut production.
“Japan’s export sanctions caused a temporary uptick in DRAM spot prices, but demand has not picked up in earnest,” said one industry watcher.
Market research firm DRAM eXchange said in a report this month that while some memory module prices have raised prices on the Japanese government’s sanctions, semiconductor inventory is still excessively high.
Suppliers are also expected to be hit by the reduced production plans, as investment into new equipment and facilities will now be postponed.
The Elec is South Korea’s No.1 tech news platform.