Today, the DRAM market is prime territory to witness a boom in demand meet a bust in supply. This boom is driven by advancements in artificial intelligence (AI) and the explosive growth of data centers. Samsung just showed off its hybrid bonding prowess, having been first to produce a 16-high stack of DRAM dies. This accomplishment puts the enterprise at the leading edge of this essential technology. As the semiconductor industry grapples with supply constraints, experts suggest that strategic innovations and capacity expansions are essential to alleviating the ongoing chip shortage.
In 2024, Samsung is looking to take the stack even further, claiming that a 20-die stack is possible. This is an ambitious goal, one that is in line with the new specifications set for the latest High Bandwidth Memory (HBM4). It can accommodate as many as 16 stacked DRAM dies. So far, the production HBM chips in use have stacks of 12 dies, with the recently released B300 using eight of those HBM chips. A further evolution of HBM technology is key. Similarly, DRAM is central to the performance and success of Graphics Processing Units (GPUs) and other accelerators that dominate the AI-specialized data centers.
The Impact of Demand on Prices
In recent years demand for DRAM has soared. This increase is primarily driven by the rapid adoption of AI applications and the opening of new data centers. According to industry reports, there are close to 2,000 data centers planned or under construction globally. This dramatic ascent points to an ever-growing thirst for memory applications. This extraordinary demand for DRAM has resulted in severe price hikes, hurting manufacturers and consumers alike.
Yet as industry analyst Thomas Coughlin notes, there is a key missing piece. Construction firms are hungry to respond to this new, increasing demand, but they’re facing crushing financial headwinds. The price of constructing new fabrication plants has exploded to upwards of $15 billion. As a consequence, manufacturers have become gun-shy about ramping up their capacity for production. “Firms may only have the cash to expand during boom times,” Coughlin noted, emphasizing the cyclical nature of the semiconductor market.
Mina Kim, another industry expert, highlights two potential pathways to resolve supply issues: “There are two ways to address supply issues with DRAM: with innovation or with building more fabs.” This policy declaration illustrates the urgency for such a technological advancement. It further stresses the need to make smart, strategic infrastructure investments to address where current and future market demand lies.
Innovations Leading to Supply Chain Diversification
Manufacturers are taking up the challenge to address these supply constraints. Innovation will continue to play an essential role in determining how DRAM production evolves in the coming years. According to Shawn DuBravac, soon there will be relief from this ongoing chip shortage. The three largest DRAM foundries will increase output, yield rates on cutting-edge stacking methods (known as “3D packaging”) and seek to make supply chains more globally dispersed. These breakthroughs are central to meeting the demand for DRAM in an ever-expanding market.
The chip supply panic that was set off by the COVID-19 pandemic has played a major role in today’s cycle of shortages as well. As corporations shift focus to AI hardware infrastructure, they are dealt a complicated hand. This landscape is further defined by the DRAM industry’s own historical boom and bust cycles. This volatility has necessitated a reevaluation of production strategies and supply chain management to mitigate risks associated with sudden surges in demand.
Samsung also intends to bring up production at a new location in Pyeongtaek, South Korea, online in 2028. This push indicates their continued willingness to invest long-term to address short-term crises. With innovations in technology and strategic investments in new fabs, manufacturers are positioning themselves to better meet the needs of an evolving market.
Future Outlook for the Semiconductor Industry
Yet signs of hope are beginning to dot the horizon. Even so, industry leaders are apprehensive about when relief from existing shortages will be available. As Intel CEO Lip-Bu Tan put it, “There’s no relief until 2028. This timeline is consistent with the continued ramp up of production at these new facilities. These facilities will help take the pressure off our strained supply chains.
It’s something that economists have noticed for ages—namely, that prices fall more reluctantly than they go up. Mina Kim reiterates this point by stating that “in general, economists find that prices come down much more slowly and reluctantly than they go up.” Considering the voracious appetite for ever more computing capacity, this is a powerful signal that it will be only trend within the DRAM part of the semiconductor industry.
Companies are adjusting to the new challenges and taking the benefit of new opportunities in the field of AI. They need to be on their toes to avert supply chain risk catastrophe. The semiconductor industry must balance short-term pressures with long-term growth strategies to ensure sustainability and resilience in an ever-changing market landscape.