[Chip Talk] Korean Companies Shift to High-End DRAM, Seeking Detour Amid China's Rise

Samsung Electronics Halts Some DDR4 Production
"Fading Out from DDR4 to DDR5"
SK Hynix Also Focuses on High-End Products
China's CXMT Expands from DDR4 to HBM

The global landscape of the DDR (Double Data Rate) DRAM market is undergoing a shift. As Chinese semiconductor companies begin to dominate the DDR4 memory market with aggressive low-cost supply strategies, domestic companies such as Samsung Electronics and SK Hynix are focusing their efforts on producing high-performance DRAM. Although Korean companies still maintain leadership in both technology and market share, Chinese firms are emerging as formidable competitors, especially as they venture into the development of DDR5 and high-bandwidth memory (HBM).

According to recent reports from Taiwanese media outlets such as the Taiwan Business Times, Samsung has halted production of some legacy DRAM products, specifically LPDDR4 8Gb items, at its 10nm-class (1z) process, and Micron has also notified clients that it will cease supplying traditional DDR4 memory modules for servers. It is currently understood that Samsung Electronics is in the process of converting its existing DRAM production lines to manufacture high-end products such as DDR5.

Photo by Hyunmin Kim

DDR is a type of main memory DRAM used in information devices such as computers and servers. The DDR series began with DDR1 in the early 2000s, followed by DDR2 and DDR3. Since 2014, DDR4 has been the main product, and the market has evolved to DDR5, which began full-scale commercialization in 2021. LPDDR is a low-power DRAM mainly used in mobile devices. In particular, the legacy product LPDDR4 is primarily installed in low-cost smartphones in China.

The global DRAM market has long been dominated by three major players: Samsung Electronics, SK Hynix, and Micron. However, recently, the rapid technological advancement of Chinese memory semiconductor companies has threatened the market. In particular, Changxin Memory Technologies (CXMT), the largest memory company in China, took control of the DDR4 market last year through aggressive low-priced supply. By significantly increasing production and pushing for price reductions, CXMT made it difficult for other companies to remain competitive. This is the backdrop to the effective withdrawal of the three established players from the market.

Last year, DDR4 accounted for about 30% of Samsung Electronics’ DRAM revenue. This year, Samsung plans to reduce the share of DDR4 revenue to below 10% and increase the proportion of high-value-added DRAM. A Samsung Electronics representative explained, "DDR4 will naturally fade out. Since we have to compete with Chinese companies in DDR4, and DDR5 offers better performance, we are shifting our focus to DDR5 as our main product."

SK Hynix also plans to focus on high-end products. During the earnings conference call in January, the company stated, "The revenue share of DDR4 and LPDDR4 was about 20% last year, but we expect it to drop to single digits this year. Based on our competitiveness in HBM and DDR5, we maintain a leading position in the DRAM market, and to focus on these products, we plan to reduce production of legacy products such as DDR4 and LPDDR4."

China Eyes DDR5 and HBM Beyond DDR4

CXMT currently produces DDR for 85% of its total DRAM output. According to market research firm Omdia, CXMT’s DRAM production this year is projected to reach 2.73 million wafers, a 68% increase from 1.62 million wafers last year. The market had expected CXMT’s DRAM production capacity to increase by about 20%, but the actual growth is more than three times that estimate.

The issue is that CXMT has begun entering the DDR5 and HBM markets. CXMT started DDR5 production at the end of last year using a 1.5nm process. According to the semiconductor industry, the yield rate (proportion of non-defective products) is reported to be as high as 80%. This figure is close to the levels achieved by Samsung Electronics and SK Hynix. However, the performance of CXMT’s DDR5 is still considered to be at the first-generation level, comparable to what Korean companies offered four to five years ago. On the other hand, some market research firms, such as TechInsights, have assessed that CXMT’s DDR5 performance has reached a level similar to that of Korean companies.

According to data from Chinese consulting firm Qianzhan, CXMT’s market share in the DRAM sector, which remained at 0% in 2020, increased to 5% last year. Taiwanese market research firm TrendForce forecasts that CXMT’s DRAM market share could rise to 12% by the end of this year. Dan Hutcheson, Vice Chairman of TechInsights, said in an interview with the Financial Times (FT), "CXMT’s market share is still low, but its rapid growth is creating a 'snowball effect.' This is similar to how Korea displaced Japan in the memory sector."

CXMT is also staking its future on the development of high-bandwidth memory (HBM). Hyundai Motor Securities recently reported, "As Chinese DRAM companies are developing HBM3 (4th-generation HBM) and HBM2E (3rd-generation HBM), it is expected that Chinese-made HBM will be installed in the Huawei Ascend series within the next two to three years."