The semiconductor supercycle, driven by the rapid advancements in artificial intelligence (AI), has begun, but the anticipated surge in NAND flash production has not materialized. Unlike DRAM, memory companies have shown restraint in increasing NAND flash production due to weak demand in consumer products such as smartphones and PCs, outside of data centers. Experts predict that unless there is a significant uptick in replacement demand for on-device AI devices and an economic environment that boosts consumption, the overall recovery of the NAND market will remain limited.

On August 11, industry sources reported that both Samsung Electronics and SK Hynix exhibited a passive trend in increasing NAND production during the second quarter. Samsung Electronics' NAND bit growth decreased by mid-single digits (4-6%) compared to the previous first quarter, while SK Hynix's NAND bit growth fell by low-single digits (1-3%) over the same period.

Bit growth, a term used to describe the overall growth rate of memory semiconductors, is calculated by converting memory capacity into bits, the smallest unit of information. This method prevents distortions that can occur when using quantity as a basis, as it reflects the importance of capacity in memory products.

In contrast to NAND, DRAM bit growth increased for both companies in the second quarter. Samsung Electronics saw a mid-single-digit (4-6%) increase compared to the previous quarter, while SK Hynix experienced a significant jump of over 20%. SK Hynix's leadership in the high-bandwidth memory (HBM) market and Samsung Electronics' response to AI demand with DDR5 and GDDR products contributed to this growth.

The disparity between NAND and DRAM growth is attributed to the subdued demand for NAND products in smartphones and PCs, despite the demand for AI servers. Additionally, the presence of 5-6 manufacturers of NAND, more than DRAM, has resulted in considerable market inventory. The industry predicts that NAND bit growth will continue to decline in the second half of the year.

Experts believe that if replacement demand for on-device AI devices, such as AI phones and AI PCs, increases, NAND recovery will accelerate in applications beyond servers. Although AI smartphones like the Galaxy S24 and some AI PCs have been released, the on-device AI market has not yet fully opened.

"Samsung Electronics' NAND bit growth in the second quarter of this year decreased by mid-single digits (4-6%) compared to the previous first quarter," said an industry source. Another source added, "SK Hynix's NAND bit growth in the second quarter also fell by low-single digits (1-3%) compared to the previous quarter."

The semiconductor supercycle, characterized by periods of increased demand and investment driven by technological advancements, is currently influenced by AI's impact on the tech industry. AI applications require significant computational power and storage, affecting semiconductor markets. NAND flash memory, primarily used in consumer electronics and data centers, has not seen the same growth as DRAM, which is used for temporary data storage in computing processes.

The current state of the consumer electronics market, particularly the demand trends for smartphones and PCs, plays a crucial role in the demand for NAND flash memory. Economic conditions also significantly influence consumer spending and demand for electronics. The emergence of on-device AI technologies, such as AI-enabled smartphones and PCs, holds potential for future demand for NAND flash memory.

Major players in the semiconductor industry, such as Samsung Electronics and SK Hynix, continue to innovate in memory technologies. Recent advancements in memory products, such as high-bandwidth memory (HBM), DDR5, and GDDR, are driving demand in specific segments like AI servers. Historical trends in the semiconductor industry, including previous cycles of boom and bust, provide context for current market conditions and future predictions.

By: DocMemory
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