SK Hynix shifts focus from HBM4 to standard DDR5 memory as market profit dynamics change and Samsung expands market share
With the high bandwidth memory segment under its belt following recent wins, SK Hynix is shifting its operational gears. The South Korean foundry is slowing down its planned ramp up in HBM4 production, and shifting some of the capacity to conventional DDR5 memory, as demand for solid state memory remains high across the board due to shortages and massive profitability.
According to a news report published by South Korean news outlet Chosun Biz, SK Hynix was planning to upgrade some of their current HBM3E lines to HBM4. Management delayed the change in plans late. The changeover aimed to allow for a greater number of shipments of standard DDR5 memory in response to growing orders from enterprise data centers and AI server operators.
The main motivation behind the change over is a paradigm shift in the pricing of memory silicon. Although high bandwidth memory traditionally has a premium over the unit price of standard DRAM chips, the unprecedented hikes in the prices of standard DRAM chips has resulted a negative impact on profit margins. Estimates from the industry suggest that the operating profit margins for standard DRAM chips exceeded that of HBM chips by more than 15% in 1Q. Referring to the journal published by Daishin Securities, the operating profit margin for standard DRAM is expected to be approach 90%
Market analysts report SK Hynix executives are monitoring their arch rival, Samsung Electronics, very intently. While Samsung has fallen behind its high bandwidth memory rivals, the significant cash flow from the enormous traditional DRAM segment of its business has stabilised its situation. Additionally, the demand forecast for Nvidia's Rubin artificial intelligence platform using HBM4, has been revised down recently, easing some of the urgency on SK Hynix to ramp up next gen HBM4 facilities quickly.
Investment banks see this tactical pause as a strategic decision rather than a retreat from the market momentum. According to analysis of Goldman Sachs, SK HYNIX is likely to sustain its domination in the HBM3 and HBM3E markets over the next one year. At same time, Morgan Stanley noted that the main contributor to earnings growth of the semiconductor industry will be overall memory prices increase and not the high bandwidth market share evolution.
Meanwhile, the slowdown of HBM4 roll out has offered Samsung Electronics a fantastic opportunity to strengthen its competitiveness. According to chip industry news, just 4 months after the HBM4's release into the market, Samsung managed to make a break through by reaching an accumulated sales volume exceeding $1,000,000,000 for the 6th generation HBM4,making it the world first memory chip manufacturer to sell that volume amount using the latest memory standard.
According to market data collected by Counterpoint Research, SK Hynix commanded a 57% share of the world's high bandwidth memory (HBM) market in the fourth quarter of the previous year. Industry analysts forecast that, if Samsung can rapidly ramp up the mass production and distribution of HBM4 over the next several months, the current core market share enjoyed by SK Hynix will come under pressure.
