Suppliers like Samsung and SK Hynix are taking a ‘cautious’ approach to their DRAM expansion plans, as they like the money they are getting now.
Chosun Biz reports that memory makers are enjoying the memory-shortage prices so much that they do not fancy spoiling them with too many actual chips.
While SK hynix and Samsung are busy cashing in on “unprecedented demand”, they are still acting twitchy about expanding output. Chosun Biz reports that Samsung expects the memory shortages to end by 2028, so to avoid “overinvesting”, it is aligning expansion with demand forecasts, which means we will build just enough to keep prices spicy.
It is claimed that suppliers are concerned about entering another DRAM demand ‘downturn’, which is why there are growing worries about “expanding production facilities”. From a business perspective, Samsung and SK hynix had a sluggish few quarters after COVID, with the PC market not exactly stampeding for upgrades and enterprise demand dragging its feet. That hangover led to an oversupply that Korean suppliers struggled to chew through until the market flipped and suddenly scarcity became a lovely, profitable feature.
For now, suppliers are not expected to make changes to expansion plans, even though customers are demanding more HBM and DRAM capacity, and those wafers do not magically appear out of thin air. The problem is that allocating more capacity without adding lines is like promising more seats on a flight while refusing to buy another plane, yet the suppliers are still talking about discipline as if they are doing everyone a favour.
At the same time, once infrastructure demand slows or levels out, memory makers would need to readjust production, so any overcommitment could lead to trouble, or at least smaller profit margins and fewer champagne problems. SK hynix has already said it would be ‘cautious’ about expanding production, which is reassuring in the same way that a landlord saying they will be “cautious” about rent rises.
The only way shortages get resolved is if suppliers increase output capacity, and infrastructure demand is showing signs of packing up and going home. Nobody is pinning down when prices might return to something resembling normal, and plenty of reports are floating the idea that this pricing pain is the ‘new normal’, which is a grim phrase that usually means someone, somewhere, has decided your wallet can cope.
