Correlation between technology shift and memory chips
The semiconductor industry (QQQ) is at an inflection point in its fourth major technology shift towards the data-driven economy of IoT (Internet of Things) and AI (artificial intelligence). We are seeing a shift towards all electronic devices being connected to the Internet and generating data. This data needs to be collected, transmitted, analyzed, processed, and inferred on a real-time basis.
Where there is data, there is a memory chip. This transition to the data-centered economy is driving the need for more complex memory in different types of devices. Realizing this changing trend, many memory chip makers are spending capital on increasing their manufacturing capabilities.
In July 2017, Samsung (SSNLF), the world’s largest memory chip manufacturer, announced plans to spend $18 billion to increase semiconductor manufacturing in South Korea (EWY) after spending $11 billion on capital spending in 1H17, according to IC Insights.
Samsung plans to spend $13.5 billion by 2021 on ramping up the production of 64-layer V-NAND chips at its Pyeongtaek plant and $5 billion on the fabrication facility in Hwaseong where it will install advanced chip manufacturing equipment such as EUV (extreme ultra violet) equipment. The company plans to use EUV technology in the next-generation 7-nm (nanometer) process node.
Samsung is also reviewing plans to build a new OLED (organic light emitting diode) manufacturing plant in South Korea by 2018 and a second fabrication line in China (FXI).
In July 2017, SK Hynix, the world’s second-largest memory chip manufacturer, raised its 2017 capital expenditure by 40% to $8.6 billion as it looks to increase DRAM (dynamic random access memory) capacity by 3% to 5% in 2017.
Micron Technology (MU) is spending $5 billion on capital expenditure in 2017. Although Micron’s capital spending is lower than that of the above rivals, its new chief executive officer, Sanjay Mehrotra, is focusing on specialized memory chips that address the needs of complex memory chips for AI, IoT, and autonomous cars.
Micron is focused on R&D (research and development) and cost optimization in an attempt to beat the competition. In this series, we’ll look at Micron’s end markets and its investments in each of these end markets.