Samsung and SK Hynix "Adjust Strategy": New Storage Factory Production Schedule Accelerated

Faced with surging demand for memory chips driven by artificial intelligence, South Korea’s two major storage giants, Samsung Electronics and SK Hynix, are accelerating the commissioning of new wafer factories. Their strategic focus has shifted from cautious inventory control to active expansion to seize the benefits of the industry “super cycle.”

According to South Korea’s Chosun Ilbo, SK Hynix plans to bring forward the trial operation of its Yongin Phase 1 wafer plant to February-March next year, initiating the process before the official completion date. Samsung Electronics is also moving up the production start of its P4 plant in Pyeongtaek from the first quarter of next year to the fourth quarter of this year, advancing the production schedule by about three months. Both companies will focus on deploying high-value-added products on their new production lines, such as high-performance DRAM and HBM (High Bandwidth Memory).

The acceleration of expansion is driven by the explosive growth in server chip demand resulting from global AI data center expansion. KB Securities data shows that as of February this year, the memory chip demand fulfillment rate among major clients was only about 60%, indicating a further intensification of shortages compared to Q4 last year. Approximately 70% of Samsung Electronics’ memory shipments are now absorbed by AI data center companies.

The market generally expects the supply tightness to persist until 2027. Citigroup predicts that this year, the supply growth rates for DRAM and NAND flash will be 17.5% and 16.5%, respectively, while demand growth rates are as high as 20.1% and 21.4%.

New production lines brought online months earlier

SK Hynix is constructing its first-phase wafer plant in the Yongin semiconductor cluster, aiming for completion by May next year. About half of the external framework work has been completed, with three of six cleanrooms under simultaneous construction. This three-story factory is roughly six times the size of its Cheongju M15X wafer plant.

According to the Chosun Ilbo, citing industry insiders, SK Hynix is preparing to start trial runs before the scheduled completion, possibly as early as February-March next year. The company plans to quickly install equipment in the first completed cleanrooms to prioritize the production of high-performance DRAM (such as DDR5) and HBM products, which are in high demand in the AI era.

Samsung Electronics is building its P4 (Fourth Factory) wafer plant in Pyeongtaek. Originally scheduled for completion in the first quarter of next year, the plan has been moved up to the fourth quarter of this year, compressing the production schedule by about three months. Samsung is flexibly allocating resources between memory and wafer fabrication equipment based on market conditions. P4 is expected to focus on producing high-performance memory currently in short supply. It is also reported that Samsung recently developed a strategy to build a 10-nanometer sixth-generation (1c) DRAM line for HBM at P4, with a monthly capacity of 100,000 to 120,000 wafers.

An industry insider quoted by the Chosun Ilbo said:

“Memory companies in Korea are extremely busy trying to accelerate production schedules.”

Capacity expansion still struggles to keep pace with demand growth

Omdia data shows that Samsung Electronics’ annual DRAM capacity (measured in wafers) will increase from 7.47 million wafers in 2024 to 8.175 million wafers this year. SK Hynix’s capacity will grow from 5.115 million to 6.39 million wafers in the same period. With the early commissioning of new factories, production is expected to further increase next year.

The core driver behind the accelerated expansion by both companies is the surge in high-performance DRAM demand from AI data centers. Since production lines are focused on high-value HBM chips, the output of general-purpose DRAM has decreased relatively, intensifying supply shortages.

KB Securities notes:

“As of February, the intensity of memory chip shortages has worsened compared to Q4 last year, with demand fulfillment among major clients at only 60%. About 70% of Samsung’s memory shipments are absorbed by AI data center companies.”

Citigroup analysis indicates that this year, DRAM supply growth will be 17.5%, and NAND flash supply will grow by 16.5%. In contrast, demand is expected to grow by 20.1% for DRAM and 21.4% for NAND flash, with demand continuously outpacing supply.

Major market research firms such as Morningstar and J.P. Morgan forecast that memory shortages will persist until 2027. DS Investment Securities states:

“If supply growth only reaches 1% in 2027, this DRAM cycle will last at least until then. Server-centric DRAM demand is directly related to competitiveness and is difficult to cut back easily. Price increases are expected to continue until Q3 2026.”

Companies confirm significant increases in capital expenditure

Both Samsung Electronics and SK Hynix stated in their recent earnings reports that they will increase capital expenditures this year to address the memory shortage. Kim Jae-june, Vice President of Samsung’s Memory Business, said:

“As AI-related demand is expected to continue, we plan to significantly expand equipment investments by 2026. However, equipment expansion this year and next will be limited, and the shortage may worsen.”

This statement highlights the lag effect of semiconductor capacity expansion. Despite increased investments and earlier production start dates, it still takes time from construction to stable mass production, making it difficult to fully alleviate supply-demand imbalance in the short term.

An industry insider explained the strategic intent behind early trial runs:

“This is to quickly enter the trial operation phase, stabilize mass production systems, and send signals to customers that supply can be reliably maintained.”

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