[Peace&Chips] Why the Semiconductor Industry Trusts 'Server' Despite the Cold Wave

Business Slump and US-China Tensions Create Challenges
Reliance on 'Servers'... 2024 Outlook Revised Downward
Data Processing Volume to Increase 91.71% by 2026

Editor's NoteSemiconductors, known as the rice of modern industry. Although it's a term we hear every day, it's hard to explain when asked. Peace & Chips will make the complex concepts and overall trends of the semiconductor industry easy to digest. Just place your spoon on it.

Recently, semiconductor issues have been dominating domestic and international news. As the semiconductor market froze due to economic downturn, related companies' earnings and export volumes decreased, triggering warning signs for the domestic economy.

Business uncertainties caused by external market factors are also increasing. This is because the US and China are competing for dominance in the semiconductor industry. In this process, domestic companies with ties to both countries are suffering direct and indirect damages.

In this bleak business environment, a ray of hope is the 'server'. Semiconductor companies such as Samsung Electronics and SK Hynix are very interested in the server market demand generated by the increase in data centers. Server semiconductors require high performance, so compared to mobile and PC semiconductors, they are high value-added products.

Image of SK Hynix's server DRAM product 'DDR5 MCR DIMM' / [Image provided by SK Hynix]

However, contrary to these expectations, the server market has recently been shrinking. Unlike the rapid growth during the COVID-19 pandemic, there are forecasts that it may slow down this year.

Market research firm TrendForce predicted at the end of January that the global server shipment growth rate for this year would be 1.87%. This was a further revision down from the November forecast, which had already been lowered from 3.7% to 2.8%.

This month, the growth rate was revised down again. TrendForce lowered this year's growth rate to 1.31% in just over a month. Compared to October last year (3.7%), this is a decrease of 2.39 percentage points.

TrendForce analyzed that due to the economic downturn, server demand from North American Cloud Service Providers (CSPs) is decreasing. Big tech companies, major players in the server market, are also reducing data center investments compared to last year.

Nevertheless, the semiconductor industry expects the server semiconductor market to eventually grow. As technologies such as artificial intelligence (AI) and big data advance, the amount of data to be processed in data centers will increase explosively.

According to statistics from market research firm Omdia, the amount of data processed by data center servers is expected to increase from 80.89 billion gigabits (Gb) this year to 155.071 billion Gb in 2026. This is a 91.71% increase in three years.

Meaningful market changes are also expected this year for D-RAM, the main memory semiconductor product of Samsung Electronics and SK Hynix. The proportion of server D-RAM in total D-RAM production (37.6%) is expected to surpass mobile D-RAM (36.8%) for the first time.

This article is from [Peace & Chips], published weekly by Asia Economy. By clicking subscribe, you can receive articles for free.

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