HBM and other AI chips are boosting chipmakers’ eanrings
In recent years, the big buzz across industries has been around the power of artificial intelligence, with some critics raising concerns about AI exacerbating the digital divide.
The power of AI is felt none the weaker in the semiconductor industry as AI is creating a DRAM divide between hot sellers and laggards among the memory chipmakers.
While server DRAM is booming, with its prices rising due to strong demand for AI-powered devices, prices of DRAMs for PCs and smartphones are dropping.
The price gap between traditional DRAMs and cutting-edge new products such as high-bandwidth memory (HBM) is also widening.
According to market research firm DRAMeXchange on Wednesday, prices of server DRAM modules, such as double data rate 5 (DDR5) 64 GB RDIMM, have increased by 1-2% from the previous month.
Samsung’s headquarters in Seoul
By contrast, the contract price of PC DRAM modules such as DDR5 16 GB SO-DIMM remained unchanged. The price of some PC DRAM chips contracted last month fell by 10-22%.
While major tech companies such as Google Inc. and China’s Baidu continue to invest in servers, leading to steady server DRAM demand, sales of PC DRAM chips have stalled, industry data showed.
RISING TECH FACILITY INVESTMENT
According to Bloomberg News, 13 large global tech firms’ facility investments for fiscal 2024 stood at $231.4 billion as of Aug. 26 – a slight increase from $230.8 billion tallied in early August. Their investments are forecast to grow 17% for fiscal 2025.
While PC manufacturers are aggressively launching AI-applied products, however, market reactions have been lukewarm.
Market research firm TrendForce recently revised down its forecast for PC DRAM price increases in the fourth quarter to flat from a hike of 3-8% it projected in September.
NEW CHIPS SOAR, OLD CHIPS DIVE
The price gap between the latest DDR5 and its older version, DDR4, is also widening.
SK Hynix’s headquarters in Seoul
According to Seoul-based Meritz Securities Co., the price of DDR5 DRAM modules for PCs was 29% higher than that of DDR4 in the third quarter – wider than a 26-percentage gap in the second quarter.
The widened price gap was largely due to increased DDR4 chip production by China’s ChangXin Memory Technologies (CXMT), according to industry officials.
CXMT’s monthly DRAM production capacity has expanded to 160,000 sheets in terms of wafer, from 40,000 sheets in 2020. The Chinese company is currently the world’s No. 4 DRAM maker.
Its monthly production capacity is forecast to rise to 200,000 sheets by the end of this year and further to 300,000 sheets by the end of 2025.
REBALLING CHIPS
Korean memory chipmakers are also known to be contributing to the drop in DDR4 prices by selling recycled chips, known as “reballing chips.”
Also known as reball chips, such semiconductors are made by recycling discarded memory modules. Although less profitable, reballing chips help boost chipmakers’ sales.
TrendForce said low-priced DDR4 reballing chips are widely available in the spot market.
SK Hynix’s HBM3E, the extended version of the HBM3 DRAM chip
EARNINGS DIVIDE BETWEEN SAMSUNG, SK HYNIX
AI chips are also creating an earnings divide between the world’s two largest memory chipmakers – Samsung Electronics Co. and SK Hynix Inc.
The market consensus of SK Hynix’s third-quarter operating profit is 6.85 trillion won ($5.19 billion), down 3.5% from a consensus forecast of 7.1 trillion won a month earlier.
Samsung, meanwhile, is forecast to post an operating profit of 11.23 trillion won in the third quarter, a 17.8% cut from a consensus forecast a month earlier.
Analysts said the smaller downward adjustments for SK Hynix were because more than half of its sales revenue comes from HBM and other high-value server DRAMs.
Samsung has a relatively higher proportion of smartphone and PC DRAMs.
Samsung’s third-quarter earnings will also be weighed by the delay in supplying the latest HBM chips to Nvidia Corp. and 1.5 trillion won in one-off charges related to employee performance bonuses, analysts said.
By Jeong-Soo Hwang
hjs@hankyung.com
In-Soo Nam edited this article.
