The worldwide semiconductor community is still coming to terms with challenges that have been ongoing for several years. Demand for Dynamic Random Access Memory (DRAM) is surging with artificial intelligence (AI) data centers leading the charge. Luckily, major players such as Samsung and Micron are responding faster than ever with their own strategy pivots to meet these changes. They’re investing in new manufacturing plants and retooling existing production lines. The memory chip shortage, primarily fueled by high demand for DRAM used in graphics processing units (GPUs) and other accelerators, shows no immediate signs of resolution.
In fact, just last month, Samsung said it would start production at a new facility in Pyeongtaek, South Korea, by 2028. The company’s goal is to keep up with the skyrocketing demand for DRAM. This increase is a direct result of our increasing reliance on AI technologies. This pivot to focus comes amidst an all-time record increase in DRAM prices. That’s because the diversion of memory supplies for other uses is driving this price increase.
This current DRAM supply cycle goes back to what I call chip supply panic caused by the COVID-19 pandemic. As businesses rushed to get the parts they needed with little notice during the health emergency, the dynamics of semiconductor manufacturing shifted completely. Now, just a couple of decades later, industry experts predict that DRAM may be the last to escape a broad tide of ever-increasing compute appetite.
Demand Dynamics
The need for DRAM is skyrocketing, propelled in large part by the rapid adoption of AI and machine learning technologies. Graphics processing units, commonly called accelerators or coprocessors, that are essential for data-intensive applications, need large memory resources. Under this demand is a cut-throat competitive environment where suppliers find themselves under immense market imperative pressure.
Mina Kim, an analyst in the semiconductor industry, highlighted the ongoing challenge: “In general, economists find that prices come down much more slowly and reluctantly than they go up. DRAM today is unlikely to be an exception to this general observation, especially given the insatiable demand for compute.” This sentiment highlights the challenge that manufacturers are having to maintain a price floor in a supply and demand environment that has changed drastically.
At the same time, Micron has faced its own issues hitting production ramps. Originally projecting for a much lower output figure, the company actually hit this target two years early. This vindication of early success is indicative of Micron’s long term innovation focus and their adaptability to fast-paced shifting markets.
Production Strategies
As the companies that manufacture DRAM race to meet this skyrocketing demand for the product, they’re running into considerable obstacles tied to production capacity. New semiconductor fabrication plants, or fabs, can have price tags that exceed $15 billion. This large sunk cost renders firms reluctant to ramp up production at new facilities without strong assurances regarding future demand. Building a fab and bringing it online is a complicated, lengthy process—often 18 months or longer—further complicating the supply chain.
To address these supply issues effectively, there are two primary strategies: innovation in memory technology and the construction of additional fabs. Mina Kim noted, “There are two ways to address supply issues with DRAM: with innovation or with building more fabs.” Companies are eager to find those solutions, as companies such as Samsung have found. These strategies help get the most out of existing facilities while sidestepping the very high price tag of new infrastructure.
Samsung recently demonstrated its capacity for innovation with the release of the B300 memory module, which utilizes eight High Bandwidth Memory (HBM) chips. Each chip is really a stack of 12 individual DRAM dies. The brand’s progress in chip design definitely shows Samsung’s determination to stay at the forefront of the market through innovation.
Future Outlook
Industry experts are optimistic that it will go well. They foresee a slow easing of today’s supply pressures, delivered with an outmoded trickle of capacity additions and yield gains in more complex wiring fashions. Shawn DuBravac commented on this potential shift: “Relief will come from a combination of incremental capacity expansions by existing DRAM leaders, yield improvements in [advanced packaging], and a broader diversification of supply chains.”
In yet a third spectacular trifecta, Samsung has passed one million. They have been able to make a 16-high stack of DRAM dies, thanks to their proprietary stacked die technology hybrid bonding. The firm has even hinted that more ambitious configurations, as stacks with 20 dies, might soon be possible.
As Samsung pushes the envelope and expands their mass production capabilities, other manufacturers will have no choice but to feel the heat to follow suit. The competition for market share in the DRAM sector is cut throat. To remain relevant, companies need to be ever nimble in their long-term strategic planning to respond to evolving consumer trends.
