The semiconductor memory chip industry is in dire straits. Recent trends in production and demand have compounded the problem. Samsung remains a dominant force in the industry. The company just announced plans for production to begin at a new, sixth facility in Pyeongtaek, South Korea, no earlier than 2028. This expansion comes at a difficult juncture for the memory and storage industry. The industry is still fighting a recession that has extended well into 2023. Production cuts of as much as 50 percent have gone into effect. This development creates urgent new issues on pricing and supply.
The price of DRAM, or dynamic random-access memory, has skyrocketed in the last year. This increase has been propelled by DRAM’s critical function in enabling graphics processing units (GPUs) and other accelerators in AI data centers. This development has absorbed available supply previously used for more typical purposes, leading to skyrocketing costs. Today’s DRAM chips consist of twelve stacked DRAM dies. The introduction of Sixth generation High Bandwidth Memory (HBM) 4, far exceeding the current capability of sixteen stacked dies, 5 is nothing short of a technological advancement.
Production Challenges and Industry Response
Samsung’s planned plant in Pyeongtaek is a powerful strategic move designed to address deeper challenges facing the memory chip market. The facility’s opening will coincide with major changes in demand patterns and production capabilities. Even with these concerted efforts, the recession in the memory market has led to massive production curtailments. This has been reflected directly in the level of supply.
“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,” noted Shawn DuBravac, highlighting the multifaceted approach required to mitigate these issues. The industry’s halcyon, historic boom-and-bust cycle is being dealt a new card. It’s hitting at the same time as a huge AI hardware infrastructure demand surge, leading to a perfect storm of limited new production capacity investment.
The highly convoluted manufacturing process of DRAM technology further complicates these supply woes. For comparison, a typical DRAM tower is ~ 750 micrometers thick. The non-volatile memory is layered on top of a logic base die, which facilitates communication between the memory dies and chips containing processors. Each individual DRAM unit bridges GPUs and other AI accelerators through up to 2,048 micrometer-scale connections. This implementation-first design sets a high bar for efficiency and inspires innovation.
Innovations in DRAM Technology
The need for faster, more efficient memory solutions has never been greater. To get ahead of these supply shortages, we need to accelerate innovations in the DRAM area. Samsung has managed to prove its capability of fabricating a sixteen-high stack through hybrid bonding methods. This landmark achievement sets the stage for groundbreaking advancements yet to come! In addition to the 20-high capacity, the company said their work can get to a twenty-high stack, with more capacity potentially in the pipeline.
Mina Kim emphasized the importance of innovation as a solution to DRAM supply issues: “There are two ways to address supply issues with DRAM: with innovation or with building more fabs.” This point of view emphasizes the critical demand for innovative technologies. We need additional fabrication facilities to meet the increasing demand for compute resources.
Kim warned that based on past experiences, price drops will happen at a much slower pace than appreciation. In short, economists have discovered that when it comes to prices, they go down a lot more slowly—and eventually—than they go up. DRAM today is certainly not an exception to this broad observation, particularly with the ravenous appetite for compute. This finding points to the possibility of sustained pricing pressures despite the emergence of new production capacities.
Future Outlook for the Memory Market
The trajectory of the memory chip market is inexorably linked not just to macroeconomic conditions, but to the pace and direction of technological progress. As no major investment in new DRAM production capacity is anticipated until at least the middle of 2025, market conditions should continue to be unstable. This one-two punch of rapidly rising demand coupled with tight supply will likely keep pushing prices higher in the near term.
Despite these hurdles, there are opportunities for closing supply gaps. Investments in innovation, along with continued construction of more fabrication plants are key to stabilizing the market long-term. Firms such as Samsung are increasing production rapidly at new fabs that have opened. This will help foster a slow but sure rebirth of the industry.