Total spending to reach $9 billion in 2016 from $13 billion
By Kim Yoo-chul
Samsung Electronics plans to sharply cut its investments in memory chips as part of plans to focus on offsetting the growing risks of the industry's downturn.
"We expect Samsung to cut its spending in dynamic random memory access (DRAM) chips by 51 percent this year from the $2.1 billion that it spent in 2015," said Amit Daryanani, an analyst at RBC Capital Markets, a global financial advisor, in a report to clients, Thursday.
Samsung Electronics spent more than $13 billion on conventional memory chips for 2014 and 2015.
DRAM chips are being used to read and write data in all computing devices, while NANDs are used to restore a system even after a device is switched off.
As the two chips become commodities because of the rapid rise of Chinese suppliers, Samsung and SK are seeking to migrate to thinner technology, which costs less and is more profitable in terms of efficiency.
In the past two years, Samsung has added chips with new 20-nanometer level DRAM technology and converted between 60 and 70 percent of its DRAM capacity to 20 nanometers.
"During the same timeframe, DRAM prices fell more than 50 percent due to weak PC demand. This year's estimated DRAM spending is at a level that is similar to what Samsung spent in the 2011 and 2013 down cycles," the report said.
In NAND flash chips, another variant of memory chip of which Samsung has also been the global leader, Daryanani said that when the substantial 3D NAND capacity build is finished, Samsung will reduce its spending on NAND chips to $2.8 billion from $6.1 billion, year-on-year.
"Samsung started to fill up the remaining space at its Xi'an factory in China in mid-2015," the report said.
"We believe that Samsung had a capacity of 90,000 to 100,000 3D NAND chips in the Xi'an plant by the end of 2015, with approximately 30,000 capacity at 48 layers and 60 to 70,000 at 32 layers. While we think Samsung will continue to invest in the leading-edge factory, we do not expect any significant 10-nanometer capacity ramp up until 2017. We are spending $3.3 billion building the new factory, with potential downside risks."
The global NAND chip market itself will see catch-up spending from other participants to become competitive with Samsung.
However, RBC said the research firm believes that investment in 3D NAND conversion will lower the average selling price (ASP), "thereby likely throwing some suppliers into a distress situation and leading to a sharper cut in spending at some point," it said.
Total investment by Samsung on chips including logic chips and memory chips is expected to be $9 billion this year, down from $13.08 billion in 2015.
Unlike Samsung, SK hynix, SK Group's semiconductor affiliate, will invest $5.4 billion, or 6 trillion won, from $5.7 billion, or 6.3 trillion won, that it invested in 2015.
"We believe that SK hynix will invest in 2Z-nanometer conversion, planar NAND migration to 14-nanometer, and development of 3D NAND," said the report.
"The company's current spending plan for this year includes clean-room construction on the second floor of M14 for 3D NAND."
One interesting point from the report is that investment in factories this year will also remain mute despite technology node advancement from 28-nanometer to 14- and 16-nanometer finFET.
"This is due to low adoption. A large number of designs stayed at 40-nanometer and 28-nanometer, while only a limited number of designs moved to 20nm and 16 and 14nm," it said.
In chip-making, thinner is better. For example, a chip of 14 nanometers is better by any measure in costs, energy efficiency and data-processing speed than chips of 16 nanometers.
By Kim Yoo-chul
Samsung Electronics plans to sharply cut its investments in memory chips as part of plans to focus on offsetting the growing risks of the industry's downturn.
"We expect Samsung to cut its spending in dynamic random memory access (DRAM) chips by 51 percent this year from the $2.1 billion that it spent in 2015," said Amit Daryanani, an analyst at RBC Capital Markets, a global financial advisor, in a report to clients, Thursday.
Samsung Electronics spent more than $13 billion on conventional memory chips for 2014 and 2015.
DRAM chips are being used to read and write data in all computing devices, while NANDs are used to restore a system even after a device is switched off.
As the two chips become commodities because of the rapid rise of Chinese suppliers, Samsung and SK are seeking to migrate to thinner technology, which costs less and is more profitable in terms of efficiency.
In the past two years, Samsung has added chips with new 20-nanometer level DRAM technology and converted between 60 and 70 percent of its DRAM capacity to 20 nanometers.
"During the same timeframe, DRAM prices fell more than 50 percent due to weak PC demand. This year's estimated DRAM spending is at a level that is similar to what Samsung spent in the 2011 and 2013 down cycles," the report said.
In NAND flash chips, another variant of memory chip of which Samsung has also been the global leader, Daryanani said that when the substantial 3D NAND capacity build is finished, Samsung will reduce its spending on NAND chips to $2.8 billion from $6.1 billion, year-on-year.
"Samsung started to fill up the remaining space at its Xi'an factory in China in mid-2015," the report said.
"We believe that Samsung had a capacity of 90,000 to 100,000 3D NAND chips in the Xi'an plant by the end of 2015, with approximately 30,000 capacity at 48 layers and 60 to 70,000 at 32 layers. While we think Samsung will continue to invest in the leading-edge factory, we do not expect any significant 10-nanometer capacity ramp up until 2017. We are spending $3.3 billion building the new factory, with potential downside risks."
The global NAND chip market itself will see catch-up spending from other participants to become competitive with Samsung.
However, RBC said the research firm believes that investment in 3D NAND conversion will lower the average selling price (ASP), "thereby likely throwing some suppliers into a distress situation and leading to a sharper cut in spending at some point," it said.
Total investment by Samsung on chips including logic chips and memory chips is expected to be $9 billion this year, down from $13.08 billion in 2015.
Unlike Samsung, SK hynix, SK Group's semiconductor affiliate, will invest $5.4 billion, or 6 trillion won, from $5.7 billion, or 6.3 trillion won, that it invested in 2015.
"We believe that SK hynix will invest in 2Z-nanometer conversion, planar NAND migration to 14-nanometer, and development of 3D NAND," said the report.
"The company's current spending plan for this year includes clean-room construction on the second floor of M14 for 3D NAND."
One interesting point from the report is that investment in factories this year will also remain mute despite technology node advancement from 28-nanometer to 14- and 16-nanometer finFET.
"This is due to low adoption. A large number of designs stayed at 40-nanometer and 28-nanometer, while only a limited number of designs moved to 20nm and 16 and 14nm," it said.
In chip-making, thinner is better. For example, a chip of 14 nanometers is better by any measure in costs, energy efficiency and data-processing speed than chips of 16 nanometers.
