Why Has the Memory Semiconductor Cycle Shortened? Industry Leader Samsung Responds

Mentioned in the conference call on the 28th... Proposing Application Diversification, Process Miniaturization, and Enhanced Response Capability

[Asia Economy Reporter Jeong Hyunjin] "The outlook for memory semiconductors next year is difficult to specify due to various macro uncertainties such as component supply issues, the impact of widespread vaccination, and raw material prices."

Samsung Electronics did not provide a clear forecast for memory semiconductors when announcing its Q3 results on the 28th. Until the first half of this year, there was an assessment that a 'supercycle' similar to 2017-2018 had come to the memory semiconductor market, but as the economy rapidly deteriorated in the second half, some opinions emerged that the cycle period of memory semiconductor booms and busts is shortening compared to the past.

What are the reasons behind the shortened cycle and reduced amplitude of the semiconductor cycle as seen by Samsung Electronics, the 'No.1 in the memory semiconductor industry'? Samsung Electronics holds the top industry position with market shares of 43.6% in DRAM and 34.0% in NAND flash markets respectively. Samsung analyzed the reasons in three points during the earnings conference call.

First, Samsung cited the diversification of memory semiconductor applications as the primary reason. In the past, most memory demand was limited to PCs, but now the range and variety of electronic devices using memory have greatly expanded. Generally, this diversification of the portfolio can reduce the volatility and cycle length of the memory semiconductor market, Samsung explained.

According to market research firm Omdia, as of Q1 this year, mobile accounted for the largest share of DRAM applications at 38%, followed by servers (30%), PCs (19%), and consumer devices (5%). DRAM demand for PCs is actually being outpaced by mobile and servers. Therefore, DRAM demand no longer moves solely based on PC supply and demand, which has led to narrower price volatility and shorter cycles than before.

Another reason Samsung presented is the miniaturization and increased difficulty of memory semiconductor processes. As process difficulty rises, maintaining past bit growth rates becomes challenging, which limits the ability to increase production even if a semiconductor supply shortage is anticipated.

Samsung also pointed out that the inventory levels of memory semiconductor suppliers, including Samsung itself, have remained low since the previous quarter, exemplifying this phenomenon. With inventories significantly reduced, there are limits to increasing production, making it unlikely to see the large amplitude downturns like the sharp downcycle following the 2018 supercycle.

The final reason cited is the improved response capability of the semiconductor industry after experiencing multiple cycles. Samsung stated, "Both suppliers and customers have gone through extreme shortages and extreme oversupply," adding, "there has been a growing need within the industry to secure overall market health." Past experiences have enhanced the ability to respond to supply and risk, allowing adjustments in demand and supply based on experience when signs of a downcycle appear.