The memory semiconductor industry has long been the backbone of Korea's economic growth. It has taken the top position in the world for years with its undisputed competitive advantage. Still, the industry is facing a number of challenges due to fast-changing market conditions and the emergence of up-and-coming Chinese competitors.
The worries over Korea's memory semiconductor sector represented by Samsung Electronics and SK Hynix are twofolds: The first is the severe downturn in its downstream industries. The global personal computer industry, for example, suffered a setback last year with its growth shrinking by two digits. The smartphone market also experienced stagnation in its growth pace last year.
In addition to these circumstances, the fear that Chinese chip suppliers would soon expand their areas of specialty further has worsened investors' confidence on Korean makers. Tsinghua Unigroup attempted to acquire SanDisk of the United States, a NAND flash chip maker, through Western Digital in which it has a controlling stake while seeking acquisitions or partnerships with other DRAM manufacturers.
This year, such worries have been relieved gradually. But it is unlikely for the downstream industry demand to recover the previous high within this year. Still, the fact that the world's major smartphone makers started mounting 4-GB DRAMs on newly launched models will likely have a positive effect on the DRAM demand. Even phones mounted with 6-GB DRAMs appear on the market. Even though the chipset demand is weak, the DRAM content growth rate per device is rising fast, which bodes well for DRAM supply-demand conditions in the second quarter. As for NAND flash RAMs too, its content growth rate is offsetting the negative growth factors due to the global smartphone market's weakness.
The financial performance of memory chip producers will likely be in a pattern of "low in the beginning and high at the end." By taking into account the seasonality of the IT industry, the memory chip sector's business cycle will likely hit the bottom at the end of the first half. The 3D NAND market is currently led by Samsung Electronics, with other followers moving fast to scale up their operations beginning this year. It is likely for the Korean chip-making industry to see more favorable market conditions this year than for the past few years.
