Thursday, January 3, 2019
Memory chipmakers had a good year in 2018, but the outlook for 2019 is marred by uncertainties arising from the US-China trade war and concerns about over-supply. Samsung Electronics and SK Hynix have already made moves to avoid over-reliance on the memory market, eyeing new business opportunities for growth in the non-memory sector which accounts for over 50% of the overall semiconductor market.
But the long-term prospect of the memmory market remains bright. Major memory chip vendors will still further enhance their memory chip portfolios to include magnetoresistive random-access memory (MRAM) chips. Although the NVM technology is not ready for mass production, it is able to deliver 20ns in read and write speeds beating the performance of DRAM. The prospects for the new technology is promising.
Advanced and constantly evolving technology will still play a critical role in reshaping the industry landscape. While major memory chip vendors take advantage of their leadership in terms of production scale and technology, other players are also striving to seize opportunities. Startup companies based in China, for example, have utilized capital support from their government to build their presence in the global memory market and intend to catch up with international technology levels.
While facing more competition in the memory sector, industry leaders Samsung Electronics and SK Hynix have moved to put more resources into their non-memory offerings mainly contract manufacturing services for non-memory chip products given the huge demand coming from the non-memory semiconductor sector.
DRAM: Still oligopoly
Over 95% of the global DRAM market is dominated by Samsung Electronics, SK Hynix and Micron Technology. The top-3 players continue to transition to more advanced process technologies while putting focus on high-margin products such as server DRAMs.
Meanwhile, the memory content per box for smartphones and other end devices continues to rise encouraging chipmakers to optimize and expand production capacities.
Samsung has started transitioning to 1ynm process technology since 2018, and the transition takes a longer period of time compared to the time spent for transitioning to 1xnm process technology. SK Hynix has since 2018 grown sales of chips built using 1xnm process technology, and recently kicked off its transition to a newer 1ynm node process.
Both Samsung and SK Hynix also have DRAM capacity expansion projects that are pending completion.
Micron started making DRAM chips using 1ynm process technology in its fiscal first-quarter 2019 ended November 29. The process node is on track for "meaningful production" by its fiscal third-quarter 2019.
Transition to 96-layer 3D NAND
In the NAND flash sector, chipmakers put focus on improving their 3D NAND production yield rates and are transitioning to 96-layer 3D NAND process technology.
Unlike the DRAM market, there are more major players in the NAND flash sector with all devoted to developing new-generation production processes. Samsung, Toshiba Memory/Western Digital, Micron/Intel and SK Hynix have all released their respective 96-layer 3D NAND technologies for volume production.
Industry leader Samsung has started transitioning to 96-layer 3D NAND manufacturing since the second half of 2018. The vendor will move forward introducing its 128-layer 3D NAND technology in early 2019.
It is worth noting that China's Yangtze Memory Technology (YMTC) is gearing up efforts to develop new-generation 3D NAND process technology aiming to catch up with its bigger international rivals. YMTC under China's state-owned Tsinghua Unigroup has started delivering samples of its 64-layer 3D NAND chip with volume production likely to kick off in the third quarter of 2019, and has plans to move directly to the 128-layer generation with volume production scheduled for 2020.
Memory outlook dims for 2019
Market observers generally are conservative about the memory market outlook for 2019, which may discourage chipmakers from implementing their expansion projects.
Falling prices of memory chips indicate the memory market weakness in 2019. Industry leaders Samsung and SK Hynix may lower their 2019 capex budgets from 2018 levels.
Both Samsung and SK Hynix have also deferred the installation of new production facilities, showing that there is no urgent need to build additional new capacities. Samsung has put on hold its plans to install additional new facilities for the manufacture of DRAM at its Pyeongtaek fab, while SK Hynix has postponed the schedule of its new equipment installation to the second half of 2019.
SK Hynix' upcoming capacity expansions will take place mainly at its new fabs in Wuxi (China) and Icheon (South Korea).
Samsung, SK Hynix beefing up foundry biz
Samsung and SK Hynix have both moved to expand their foundry operations, judging from robust chip demand for emerging AI and IoT applications such as self-driving vehicles. The moves also allow them to diversify their offerings and target markets for sustainable business growth.
The global semiconductor market is forecast to generate US$478 billion in 2018, with 65.5% coming from the non-memory sector. Despite their memory industry leadership, Samsung and SK Hynix collectively hold a less than 5% share of the non-memory IC segment, compared with Intel's 20.3% share and Qualcomm's 6.8% share.
Demand for CMOS image sensors, mobile application processors and automotive related chips will be driving the future non-memory IC market growth. Acknowledging the robust non-memory chip demand, Samsung and SK Hynix already spun off their foundry operations to create independent business units in a move to expand their foundry businesses.
SK Hynix also has plans to shift part of its foundry capacity to Wuxi, China where its new fab will be located. The move is to vie for new orders and businesses from the local market in China.
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