Samsung Electronics has reported earnings that exceeded market expectations, yet concerns about a potential peak-out in the semiconductor sector persist, particularly among financial analysts. However, industry experts believe that the favorable supply-demand environment for memory chips is unlikely to be disrupted in the short term, as significant increases in memory production from new fabs will not materialize until after 2028.
According to reports from foreign media and industry sources on July 9, analysts at the U.S. Treasury have recently drafted an internal report warning of the potential overheating of AI data centers based on the profitability of big tech investments. The report, addressed to Treasury Secretary Scott Vessen, indicates that if the monetization of AI infrastructure investments falls short of expectations, it could lead to a broader shock across the semiconductor, cloud, and power industries, potentially more severe than the dot-com bubble.
On July 6, Morgan Stanley also cautioned that if the slowdown in investments from hyperscalers becomes a reality, it could dampen the upward earnings estimates for memory companies. Morgan Stanley noted, "The current upward revision in memory sector earnings has reached historical highs, suggesting that short-term momentum is likely entering a phase of consolidation."
Morgan Stanley had previously raised concerns about a so-called 'semiconductor winter' in 2021, predicting a downturn and earning a reputation as the 'grim reaper' of the market. In 2024, the firm slashed its target price for SK Hynix due to an oversupply of high-bandwidth memory (HBM), triggering a significant drop in stock prices.
Despite these warnings, the semiconductor industry has drawn a line, stating that a decline in investment sentiment in the capital markets does not necessarily indicate an immediate drop in demand. Samsung's monthly DRAM wafer production capacity of 650,000 to 700,000 units far surpasses its competitors, but it struggles to meet the explosive demand for HBM and high-capacity DRAM for servers. SK Hynix is also focusing on ramping up its new Cheongju M15X fab, but is finding it challenging to keep up with the influx of customer orders.
As chronic shortages persist, global tech giants like NVIDIA, Microsoft, Google, and Apple are expanding partnerships with the two major memory companies in South Korea to enhance the processing speeds of their proprietary AI chips through next-generation HBM and server product supply agreements.
Most analysts believe that concerns about an imminent oversupply are unfounded, considering the timelines for the completion of new production lines and equipment installation announced by Samsung and SK Hynix. Samsung's fourth plant (P4) at the Pyeongtaek campus is not expected to begin operations until at least the first half of next year. Similarly, SK Hynix's first fab at the Yongin semiconductor cluster is slated to start operations by the end of next year. Given the lead time required for cleanroom construction and yield stabilization, meaningful levels of actual supply are not anticipated until after 2028.
Notably, starting with the sixth generation of HBM (HBM4), advanced foundry processes and complex packaging technologies will be introduced, significantly increasing the difficulty of mass production. Consequently, even with the same wafer input, the actual yield of chips will likely be considerably lower than that of conventional DRAM. While capital investments may increase nominal production capacity, the actual supply of advanced memory will be difficult to ramp up quickly.
Lee Jong-hwan, a professor at Sangmyung University’s Department of System Semiconductor Engineering, stated, "While there may be short-term fluctuations due to macroeconomic indicators or psychological factors, the core issues in the AI memory market are technological bottlenecks and physical supply limitations. The market influence of Korean companies with advanced process technology and production capabilities will remain strong for the foreseeable future."
* This article has been translated by AI.
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