Samsung Electronics and SK hynix, the world's top two suppliers of dynamic random access memory (DRAM) chips, plan to invest more on them because of continued solid demand for use in mobile devices such as phones.

But company officials and market experts say if the two raise their production capacity, the long-term supply growth will remain constrained due to technological complexity.

"Samsung Electronics plans to maintain greater flexibility in the operation of our chip plants according to the market situation. Although we are producing both memory chips including DRAMs and NANDs, as well as logic chips, we may increase the output of DRAMs for mobile devices to maximize short-term profit," an official at the company said Sunday.

He stressed that as supply shift continue from DRAMs for use in conventional PCs to those for use in mobile devices, the firm expects chip prices to stabilize for the remainder of this year.

This year, Samsung is busy manufacturing DRAMs for Apple's new iPhone said Credit Suisse. Samsung mainly produces DRAMs at its plant in Giheung, near Seoul, while it manufactures NANDs and processor chips at its factories in Xian, China and Texas, the United States.

Samsung's local rival SK hynix also plans to produce DRAMs using the company's latest 21-nanometer class processing technology at its plant in Icheon, Gyeonggi Province, near Seoul, from the latter half of this year, said sources.

Although SK hynix focuses on profitability instead of market share, some say it may ride the current market trend in DRAM pricing by expanding.

Its M14 line is nearly finished with the clean room installation scheduled to be completed by the end of the second quarter.

"The outlook for SK hynix is bright now because global DRAM supply is likely to increase in 2016. The industry appears to be headed into another shortage," said Credit Suisse analyst Keon Han.

Unlike Samsung, SK hynix generates more than 80 percent of its annual revenue from selling pure memory chips, which means that it is well-positioned to benefit more than its rivals by expanding DRAM output.

"We remain bullish on memory stocks across the board," said Bernstein Research.

Samsung Electronics is the leader in the DRAM mobile devices market as of the first quarter with 52.1 percent, followed by SK hynix with 22.9 percent and Micron Technology with 22.6 percent, according to data from market research firm Dramexchange.

By: DocMemory
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