SK Hynix issued a notice that the price of DRR5 will increase by 20%!

On August 14, as memory chip giants such as SK Hynix, Micron, and Samsung have massively converted their production capacity to produce high-bandwidth memory (HBM) for AI needs, this has directly led to a sharp drop in the output of memory specifications such as DDR5. According to supply chain rumors, some manufacturers have received a notice from DRAM giant SK Hynix to increase the price of DDR5 by 15% to 20%, and it is expected that Samsung, Micron, and others will follow suit.

SK Hynix has previously stated that the HBM production capacity for 2024 has been fully booked, and even the production capacity for 2025 has almost been sold out. In order to meet customer needs, more than 20% of the existing DRAM production line capacity will be converted to produce HBM. Samsung is also actively catching up with SK Hynix. It is rumored that Samsung will convert about 30% of its existing DRAM total production capacity to produce HBM with higher profit margins.

HBM is a key component of AI chips. As the demand for AI chips grows, the demand for HBM is also in short supply. Currently, SK Hynix occupies a leading position in the HBM market, and Samsung is also continuing to work on HBM, hoping to catch up with SK Hynix. The successful verification by Nvidia means that it can supply Nvidia in large quantities, thereby further increasing its market share in the HBM market and narrowing the gap with SK Hynix.

Why do SK Hynix and Samsung need to transfer so much DRAM production capacity to produce HBM?

Because even at the same process node, the consumption of wafers for HBM of the same capacity is much higher than that of DDR5. Micron has previously pointed out in its financial report that across the industry, HBM3e consumes about three times the wafer supply of DDR5 to produce a given number of bits in the same technology node.

In other words, SK Hynix's conversion of more than 20% of the DRAM production line capacity to produce HBM can only bring less than 1/3 of the total capacity of these transfers. Similarly, Samsung's transfer of 30% of the existing DRAM production capacity to produce HBM may only bring about 1/3 of the total capacity of these transfers.

Although SK Hynix and Samsung will transfer part of their existing DRAM production capacity to produce HBM, which will help alleviate the tight supply of HBM in the market, it will also cause a significant reduction in the supply of standard DRAM products such as DDR5. Since Samsung and SK Hynix are the world's first and second largest suppliers of DRAM chips, respectively, accounting for about 75% of the market share, it is bound to cause tight supply and price increases for global standard DRAM products such as DDR5.

It is understood that SK Hynix's price increase for DRR5 is mainly aimed at contract prices. Module manufacturers mainly use spot prices, hoping that when contract prices rise, spot prices will also rise, which will help module manufacturers to usher in low-price inventory benefits.

In addition, while leading manufacturers with HBM production capacity have expanded HBM production, resulting in tight supply and rising prices of DRR5, Nanya Technology has recently started shipping 16Gb DDR5 developed with its own 1B process technology. Previously, Changxin Storage also launched DDR5 products in the second half of last year, and both are expected to benefit from this round of market opportunities.

DDR3 prices will also rise

When it was reported that the price of DDR5 would rise sharply, DDR3 also gradually stopped production due to the gradual discontinuation of production by the leading manufacturers, resulting in reduced production capacity and rising prices.

Earlier, there was news in the industry that in order to develop HBM and DDR5, Samsung had notified customers that it would stop producing DDR3 at the end of the second quarter of this year; SK Hynix had already converted the DDR3 process of its Wuxi plant in mainland China to DDR4 as early as the end of last year, which was equivalent to no longer supplying DDR3; and Micron also significantly reduced the supply of DDR3 to expand DDR5 and HBM production capacity.

As the world's three major memory manufacturers have no time to take care of the DDR3 market, they have gradually faded out or even stopped producing DDR3, resulting in a sharp drop in supply. However, a large number of terminal markets such as the Internet of Things, network communications and automotive use are still using DDR3. In addition, after the introduction of AI technology, terminal products also have a demand for capacity upgrades for DDR3, which has led to a price increase of about 20% in the first half of the year for DDR3.

However, this is beneficial to Taiwan DRAM manufacturers such as Winbond Electronics, Jinghao Technology and Etron, which focus on DDR3. The relevant Taiwanese manufacturers are expected to benefit from this round of order transfer opportunities and price increase effects, driving performance growth.

As memory chip giants such as SK Hynix, Micron and Samsung increase their investment in high-bandwidth memory (HBM) production, the supply of DDR5 memory in the market has decreased significantly, leading to price increases. It is reported that SK Hynix has notified its customers that the quotation of DDR5 will increase by 15% to 20%, and companies such as Samsung and Micron are also expected to follow up with price increases. SK Hynix's HBM production capacity has been fully booked. Not only has the production capacity in 2024 been sold out, but the production capacity in 2025 has also been almost fully sold. This has forced SK Hynix to convert more than 20% of the capacity of its existing DRAM production lines to produce HBM. Samsung also plans to convert about 30% of its existing total DRAM production capacity to produce HBM with higher profit margins.

As an important component of AI chips, HBM market demand continues to rise with the rapid development of AI technology. Currently, SK Hynix leads the HBM market, while Samsung is trying to catch up, hoping to further expand its market share through cooperation with Nvidia. However, HBM production consumes much more wafers than DDR5, which means that although SK Hynix and Samsung have transferred a large amount of DRAM capacity, the actual HBM capacity increase is still very limited. SK Hynix's conversion of 20% of DRAM capacity to HBM production can only bring less than 1/3 of capacity increase; similarly, Samsung's transfer of 30% of capacity can only achieve a similar proportion of capacity increase.

Although this capacity transfer has alleviated the supply shortage of HBM, it has also led to a sharp reduction in the supply of standard DRAM products such as DDR5, which in turn has triggered a trend of price increases. Given that Samsung and SK Hynix have a market share of about 75% in the global DRAM market, this supply shortage will have a profound impact on the global DDR5 market.

At the same time, manufacturers such as Nanya Technology and Changxin Storage have seized the opportunity during this period to launch their own DDR5 products in order to benefit from this round of market price increases. In addition, as DRAM manufacturers gradually reduce or even stop the production of DDR3, the price of DDR3 has also risen due to the imbalance between supply and demand. This situation has brought opportunities for transfer orders and price increases to Taiwan DRAM manufacturers such as Winbond Electronics, Jinghao Technology and Etron, which focus on DDR3, and has driven their performance up.

In this context, HOREXS, as a manufacturer with more than 15 years of manufacturing experience in the field of semiconductor packaging substrates, has strong production capabilities in the manufacturing of various memory packaging substrates such as DDR3, DDR4, and DDR5, although its main business does not involve the production of HBM. With the changes in the DDR5 and DDR3 markets, HOREXS's technological advantages and production flexibility may bring more new cooperation opportunities to customers, especially in the context of tight supply in the global memory market. HOREXS's high-quality packaging substrate products and attractive price levels may become the preferred choice of many memory manufacturers. In addition, HOREXS is preparing to enter the production of DDR6 packaging substrates, which lays a good foundation for its competition in the future memory market.