[Peace&Chips] "Deeper Troughs and Shorter Cycles" in Semiconductors: Challenges Bring Greater Opportunities

'Cycle Industry' Semiconductor... Recovering from Recession
Memory Industry Boosts Upcycle Expectations

Will AI Drive New Sales Records in DRAM Market?
"Increasing Memory Importance Is a Future Challenge"

Recently, SK Group Chairman Chey Tae-won visited the SK Hynix campus in Icheon, drawing attention by mentioning the semiconductor cycle. At the event, Chairman Chey urged, "We must devise management plans and find business methods that align with the accelerating cycle speed, where the troughs deepen and the cycles shorten." He emphasized that with increased market volatility, it is necessary to establish new forecasting models instead of relying on past formulas and to respond nimbly to market demand from a macro perspective.

The semiconductor industry is a representative cyclical sector. Since market booms and recessions occur periodically, the overall market trend resembles a wave pattern.

Looking into the semiconductor cycle mentioned by Chairman Chey, it has clearly shortened. In the past, the cycle changed every 4 to 5 years, which was sometimes called the Olympic cycle. Because semiconductor products were limited and mainly used in the PC sector, the cycle was relatively long and stable. Especially for memory semiconductors, which are general-purpose products, mass production was done uniformly and then supplied to each demand sector. Since the business structure was not complex, market forecasting was easier than it is now.

However, over time, various semiconductors have been used not only in PCs but also in mobile devices, servers, and other areas, increasing the factors influencing the market. The overall semiconductor market size has also grown significantly compared to before, causing industry revenues to rise sharply during booms and losses to deepen during recessions. Recently, as countries regard semiconductors as economic and security assets and take various actions, the factors affecting the market beyond the market itself have also increased.

The current semiconductor market is emerging from a downcycle. After about two years of recession from 2022 through last year, recovery signals are appearing. Several forecasts suggest that the semiconductor market will grow to the level of the boom year 2021. In particular, the recovery in the memory semiconductor market, which is sensitive to economic changes, is expected to be prominent. The dominant opinion is that market demand will increase alongside production cuts by the memory industry.

The memory industry is optimistic about the upcoming upcycle. As artificial intelligence (AI) expands its applications across industries, demand for high-performance and high-capacity memory, including High Bandwidth Memory (HBM), is expected to grow rapidly. The AI effect is not expected to be short-term but to bring mid- to long-term changes to the market. Just as the DRAM market set new sales records whenever new applications like smartphones emerged in the past, the same could happen this time.

Jung Sung-gong, senior researcher at market research firm Omdia, said at a domestic conference held last November, "AI will become another pillar of sales for the DRAM market," adding, "We expect that sales records could be broken during the upcycle." This is positive news for Samsung Electronics and SK Hynix, which hold over 70% of the global DRAM market share.

Of course, another downcycle may follow the upcycle. When product supply increases during a boom, demand may decrease due to various factors, leading to inventory buildup and falling memory prices. The memory industry believes that attempts to shift from mass production of a few product types to customer-tailored production will reduce such problems. Previously, generic products were mass-produced based on demand forecasts, but in the future, order-based business supplying customized products for each customer is expected to increase.

In the long term, the importance of memory is being enhanced through technological development. While system semiconductors, which perform computations, play a central role in the overall computing architecture, memory semiconductors, which store information, serve as auxiliary components supporting system semiconductors. In the future, memory semiconductors are expected to incorporate some computational functions. Samsung Electronics and SK Hynix have succeeded in developing Processing-In-Memory (PIM) technology, which will be key to related products.

An industry insider said, "Increasing the importance of memory will be the direction the memory industry must take to expand the market," adding, "When memories with computational functions like PIM become commercialized, various functionalities can be expected."

Editor's NoteSemiconductors, often called the rice of modern industry. Although we hear the term daily, it is hard to explain. Peace & Chips will make the complex concepts and overall industry trends easy to digest. Just place your spoon and enjoy.