SK Hynix faces increasing competition amid a global economic recovery, and exports of multi-chip packages (MCPs), including high-bandwidth memory (HBM) AI chips, are falling rapidly.

According to Korean data platform KED Aicel, SK Hynix's MCP exports from its chip factories in Icheon and Cheongju reached US$1.29 billion in January. Its latest exports increased by 105.7% year-on-year, but fell by 29.8% month-on-month. After adjusting for working days, the January data fell 19.3% from December. This is the largest month-on-month drop since the company developed the world's first 12-layer HBM3 chip in April 2023.

MCP generally refers to HBM and mobile devices - both of which are high-capacity chips.

Analysts said the monthly sales decline showed that advanced HBM chips, once in high demand, are now more vulnerable to fluctuations in import demand.

01 Exports fall, interest in HBM wanes

South Korea's MCP exports to Taiwan were $994 million in January, the lowest since May 2024, according to KED Aicel. Taiwan is home to the world's largest foundry, or contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC). Exports in January fell 51.1% from $2.03 billion in December. HBM chips are used in AI-focused graphics processing units and are typically sent to TSMC in Taiwan for packaging before being shipped to end customers such as Nvidia Corp.

A chip industry insider said: "The sharp drop in MCP exports in January shows that AI chips are now affected by seasonality."

Analysts expect the HBM market to become more sensitive to seasonal trends in the coming quarters. "Even in the HBM market, seasonality has already emerged," iMSecurities analyst Song Myung-seop said in a research note.

He said SK Hynix's HBM shipments in the first quarter are likely to fall by more than 10% from the fourth quarter of 2024. He expects SK's DRAM and NAND chip shipments to fall by 12% and 18% respectively in the same period.

"Global HBM demand will double this year from last year. But in the first quarter, HBM sales will fall from the previous quarter due to tightening U.S. trade restrictions on China," said Park Sang-wook, an analyst at ShinyoungSecurities. Samsung Electronics Co.'s chip factories in Pyeongtaek, Yongin, Suwon, Cheonan and Asan saw their total MCP exports in January fall 62.3% from the previous month, according to KED Aicel data.

Meanwhile, interest in HBM appears to be waning.

According to Google Trends, searches containing the HBM keyword peaked in November 2023 and have since fallen by more than 10%. The number of HBM searches on Google in November 2023 was almost double that of April 2023.

One of the most searched keywords along with HBM is SK Hynix. Search data from platforms such as Google, Naver and YouTube are often considered leading indicators for those looking for investment opportunities.

"Google Trends data is a valuable tool for understanding changes in consumer interests and market trends. The strong upward trend of HBM-related searches has slowed down recently," said Park I-kyung, data analyst at Hankyung Aicel.

02 Did DeepSeek bring negative impact?

Samsung Electronics and SK Hynix are expected to face increasing uncertainty in the fast-growing artificial intelligence (AI) memory chip business as the rise of Chinese AI startup DeepSeek deals a blow to Nvidia and other U.S. AI tech companies, according to South Korean analysts.

DeepSeek recently unveiled its latest inference model, R1, which has performance comparable to OpenAI’s o1. The startup said it cost just over $5.5 million to train the model, despite using low-end Nvidia graphics processing units (GPUs) designed for the Chinese market.

While many details remain to be verified, this raises questions about the competitiveness of large tech companies that have invested billions of dollars in AI infrastructure.

iM Securities analyst Song Myung-sup said: "The pattern in which large-scale investment is crucial to the development of AI has changed. Large technology companies may now focus on more effective strategies rather than blindly competing to get the latest GPUs."

"The shift may have a negative impact on Korean memory semiconductor companies, which have been supplying high-capacity high-bandwidth memory (HBM) to Nvidia to meet the needs of AI," he said.

As a result, investors have dumped Nvidia shares, which account for 70% of the AI semiconductor market. The company's market value shrank by about US$589 billion on January 27 (local time) alone, and there has been no sign of recovery. Other US stocks related to its AI value chain are also facing difficulties.

HBM3e and GPU

If demand for Nvidia's high-performance GPUs weakens as the market expects, SK Hynix, which almost exclusively supplies HBM3e to Nvidia, could see a sharp drop in revenue.

HBM3e is the most advanced version of its kind and plays a key role in boosting GPU performance, and 40% of SK Hynix's total DRAM sales come from the HBM business. Samsung Electronics is also conducting quality tests in preparation for supplying these chips to Nvidia, which it sees as its next revenue source.

Affected by this, Samsung Electronics and SK Hynix's stock prices on Friday did not ease market concerns. Samsung's stock price fell 2.4% to 52,400 won ($36.07), while SK Hynix's stock price fell sharply by 9.8% to 199,200 won. The decline occurred on the first trading day after the release of DeepSeek.

Earlier, power-related stocks rose sharply due to expectations of benefiting from the construction of artificial intelligence infrastructure, but then also fell sharply.

"Since we supply HBM for GPUs to multiple suppliers, we are closely monitoring industry trends and considering various scenarios," Kim Jae-joon, executive vice president of Samsung's Device Solutions (DS) division, told investors during a fourth-quarter earnings call on Friday.

"As the market presents both mid- and long-term opportunities and short-term risks, we will ensure a prompt and timely response to rapid changes in the market," he said.

In addition to market dynamics, geopolitical tensions are adding another layer of uncertainty for South Korean chipmakers.

In an effort to solidify its leadership in artificial intelligence, the U.S. government is reportedly considering measures to block exports of Nvidia's low-end H20 chips, which are equipped with Samsung Electronics' HBM, to China. In response, China may increase support for domestic semiconductor companies and accelerate its pace of self-sufficiency, which could reshape demand for South Korean chips.

"If the U.S. government uses this incident as a reason to impose a blanket ban on Nvidia's sales of dedicated GPUs in China, South Korean DRAM manufacturers that supply HBM for these GPUs will also suffer negatively," Kim Jae-joon said.

03 Samsung and SKhynix, adding HBM

As a follower of HBM, Samsung Electronics has been known to have been redesigning its cutting-edge DRAM to increase chip size since the second half of last year. This is a strategy that focuses on "yield (ratio of good products to input products)" rather than productivity and performance, and is interpreted as a strategy to focus on the stable mass production of high value-added memory such as HBM (high bandwidth memory).

According to industry sources on the 10th, Samsung Electronics has been developing 1c (6th generation 10nm) DRAM since the second half of last year by using a larger chip size than existing products. 1c DRAM is the next-generation DRAM that Samsung Electronics plans to mass produce in the second half of this year. The circuit line width is about 11 to 12 nanometers (nm). The previous generation 1b (fifth generation) DRAM is expected to be around 12-13 nanometers.

Samsung Electronics plans to prioritize 1c DRAM for the next-generation HBM4 (6th generation HBM). The goal is to quickly improve the competitiveness of HBM and DRAM, making it one generation ahead of its main competitors. SK Hynix, Micron, etc. have decided to adopt 1b DRAM for HBM4.

1c DRAM of Samsung

Samsung Electronics' 1c DRAM has been facing difficulties in improving yield since the early stages of development. It is reported that the variety has obtained the first batch of high-quality products in the second half of last year, but the output has not reached a satisfactory level.

The main background is productivity. Initially, Samsung Electronics decided to reduce the chip size of 1c DRAM relative to the original plan in consideration of competitors. As the chip size becomes smaller, the production volume per wafer increases, which is conducive to improving manufacturing cost efficiency. But some people pointed out that this will reduce stability.

Therefore, Samsung Electronics decided to partially modify the design of 1c DRAM at the end of last year. The main goal is to control the line width of the core circuit to the minimum while relaxing the line width standard of the peripheral circuit to quickly improve the yield.

Several people familiar with the matter said, "Samsung Electronics changed the design of 1c DRAM to increase the chip size and is committed to improving the yield, with the goal of completing it by the middle of this year." In addition, "It seems that they are committed to stable mass production of next-generation memory, even if the cost is higher."

It is too early to discuss the significant output of 1c DRAM after the design change. Samsung Electronics is expected to announce specific results around May or June both internally and externally.

At the same time, for similar reasons, some 1b DRAM products are also being redesigned to improve yield. It is reported that efforts are being made to increase the yield of 32Gb (gigabit) 1b DRAM products for servers to 70-80% of the mass production level.

Samsung also expected in its earlier earnings conference that the supply of the company's improved HBM3E will see an overall increase starting from the second quarter, a trend closely related to the US government's export control policy for cutting-edge semiconductors. The policy has prompted customer demand to gradually shift to the improved HBM3E, although this may temporarily suppress the overall demand for HBM to a certain extent.

However, it is worth noting that from the second quarter, demand for 12-layer HBM3E is expected to increase rapidly, and the growth rate may even exceed previous expectations. In view of this, Samsung Electronics has formulated a plan to increase the supply of HBM bits for the whole year this year to twice that of last year to ensure that market demand is fully met.

These positive actions and plans of Samsung Electronics in the field of HBM will undoubtedly further promote the company's competitiveness and development momentum in the semiconductor chip market.

However, challenges still exist. Samsung Electronics executives pointed out that although HBM sales achieved a 190% month-on-month growth in the fourth quarter of 2024, it still did not reach the expected level. Despite this, Samsung Electronics is optimistic about the future development of the HBM market and expects demand to resume growth in the second quarter of 2025. To this end, the company has set a goal to double the supply of HBM this year compared to last year.

Industry leader SKhynix is even faster in HBM. The chairman of SK Group said earlier that SK Hynix's high-bandwidth memory (HBM) is being developed faster than the needs of its customer Nvidia.

Earlier, there was news that South Korean memory chip giant SK Hynix has won a large order to supply high-bandwidth memory (HBM) to Broadcom. According to sources, the US chip giant will purchase memory chips from SK Hynix to be installed on the artificial intelligence computing chip of a large technology company. SK Hynix is expected to supply the chip in the second half of next year. The source also said Broadcom is actively approaching the South Korean memory chip giant, the world's largest HBM supplier, to procure proven HBM.

SK Hynix will certainly adjust its DRAM production capacity forecast now that it now supplies HBM to Nvidia and Broadcom. It currently supplies most of the HBM for Nvidia's AI accelerators.

The report said the South Korean company plans to expand its production capacity of 1b DRAM (the core chip used as its HBM) to 140,000 to 150,000 300mm wafers next year. But with the new deal with Broadcom, this number is expected to increase to 160,000 to 170,000 300mm wafers. SK Hynix can also postpone the installation schedule of its 1c DRAM (the successor to 1b DRAM) equipment to meet this new urgent demand first.

SK Hynix also reportedly plans to invest more than 10 trillion won, including converting existing outdated memory production lines into HBM production lines.

But with the emergence of deepseek, it is rumored that this has caused the two giants to re-evaluate HBM.

04 HBM, short-term volatility?

According to Samsung, HBM revenue is expected to decline in the first quarter of 2025, and demand uncertainty has increased. They pointed out that the future demand trend of HBM will mainly depend on the supply status of GPU products and the specific impact of US export control policies.

Industry experts still believe that Korean chipmakers will continue to grow. Many believe that Nvidia's market dominance will continue. After all, even DeepSeek's R1 was developed using Nvidia GPUs. In other words, HBM will continue to be hot.

Industry insiders said: "Traditionally, AI development requires a lot of investment and the entry barrier is high, but as more players enter the market, the AI ecosystem will grow. Since Nvidia's H800 chip still requires HBM, the demand for high-end memory is likely to remain strong."

Reference link: 

https://www.kedglobal.com/korean-chipmakers/newsView/ked202502100006

https://zdnet.co.kr/view/?no=20250210164808

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