By Kim Yoo-chul
Samsung Electronics and SK hynix, the world's two biggest memory chipmakers, are expected to sharply cut their investments in memory chips to counter declining prices, analysts said.
"Our total capital spending estimates in the global memory chip industry stand at $50.2 billion for this year, a cut by 4 percent from the previous year," said Amit Daryanani, senior analyst at RBC Capital Markets, in a report Monday. "The biggest decrease comes from a $4 billion drop in Samsung capital spending, down 31 percent year on year."
RBC expects Samsung Electronics' capital spending in dynamic random access memory (DRAM) chips ― a vital component for use in all digital devices used for reading and writing data ― to drop by $2.6 billion after converting up to 70 percent of its capacity to manufacturing 20-nanometer processing technology.
In NAND flash chips, a type of memory chip that stores data on devices that have been switched off, RBC said Samsung will cut its investment to $1 billion after its state-of-the-art NAND factory in the Chinese city of Xian is completely functional.
SK hynix may also spend less than its projected 6 trillion won.
"While we expect SK hynix to invest in 20-nanometer DRAM conversion, we think the probability of SK hynix making a significant investment in 3D NAND is low, given the average selling price and technology challenges," Daryanani said.
Both Samsung Electronics and SK hynix said they will announce updates to their investment plans from their earnings reports for the first quarter of this year, which for both companies was set for the last week of this month.
"Macro pressure could lead to declines in the semiconductor industry and restrain investments in capital equipment," the senior analyst said. "Operating margins have historically fluctuated worse than revenue declines."
RBC's latest observation is in accordance with Mark C. Newman from Bernstein Research, another influential market research firm. Newman urged Samsung to focus on elevated profit margins rather than market share.
SK hynix is expected to report some 500 billion won in operating profit for the first quarter of the year, down from 1.58 trillion won a year ago, while Samsung Electronics' memory chip division posted 2.6 trillion won in quarterly profits, down from 2.93 trillion won for the same period a year earlier.
"Unlike Samsung which also generates cash by selling logic chips such as processors, SK hynix which heavily relies on volatile memory chips will be impacted the most by any opportunistic measures by Samsung or Chinese companies," said an official.
Samsung Electronics and SK hynix, the world's two biggest memory chipmakers, are expected to sharply cut their investments in memory chips to counter declining prices, analysts said.
"Our total capital spending estimates in the global memory chip industry stand at $50.2 billion for this year, a cut by 4 percent from the previous year," said Amit Daryanani, senior analyst at RBC Capital Markets, in a report Monday. "The biggest decrease comes from a $4 billion drop in Samsung capital spending, down 31 percent year on year."
RBC expects Samsung Electronics' capital spending in dynamic random access memory (DRAM) chips ― a vital component for use in all digital devices used for reading and writing data ― to drop by $2.6 billion after converting up to 70 percent of its capacity to manufacturing 20-nanometer processing technology.
In NAND flash chips, a type of memory chip that stores data on devices that have been switched off, RBC said Samsung will cut its investment to $1 billion after its state-of-the-art NAND factory in the Chinese city of Xian is completely functional.
SK hynix may also spend less than its projected 6 trillion won.
"While we expect SK hynix to invest in 20-nanometer DRAM conversion, we think the probability of SK hynix making a significant investment in 3D NAND is low, given the average selling price and technology challenges," Daryanani said.
Both Samsung Electronics and SK hynix said they will announce updates to their investment plans from their earnings reports for the first quarter of this year, which for both companies was set for the last week of this month.
"Macro pressure could lead to declines in the semiconductor industry and restrain investments in capital equipment," the senior analyst said. "Operating margins have historically fluctuated worse than revenue declines."
RBC's latest observation is in accordance with Mark C. Newman from Bernstein Research, another influential market research firm. Newman urged Samsung to focus on elevated profit margins rather than market share.
SK hynix is expected to report some 500 billion won in operating profit for the first quarter of the year, down from 1.58 trillion won a year ago, while Samsung Electronics' memory chip division posted 2.6 trillion won in quarterly profits, down from 2.93 trillion won for the same period a year earlier.
"Unlike Samsung which also generates cash by selling logic chips such as processors, SK hynix which heavily relies on volatile memory chips will be impacted the most by any opportunistic measures by Samsung or Chinese companies," said an official.
