Samsung & SK Hynix Hesitate to Boost DRAM Production, Focus on Long-Term Gains

The realm of memory technology is currently navigating a complex landscape. With Samsung and SK hynix commanding over 70% of the global DRAM production, these industry giants are pivoting their strategies to focus on profitability amidst a booming demand for memory.

Industry Grapples with Ongoing DRAM Shortages

Memory shortages pose significant challenges across various sectors, hitting consumers hardest with skyrocketing RAM prices. Recent weeks have seen an alarming surge in costs, rendering RAM nearly unaffordable. This stems from an unprecedented demand for DRAM, which has reached record highs. Reports suggest that major DRAM suppliers, including Samsung and SK hynix, are bracing for prolonged shortages enduring for several upcoming quarters.

Rather than rapidly expanding facilities, we will pursue a strategy of maintaining long-term profitability. We will minimize the risk of oversupply through a capital expenditure (CAPEX) strategy that balances customer demand and pricing.
– Samsung

The Balancing Act: Production vs. Demand

Scaling up DRAM production isn’t a simple task; it demands extensive resources and time. Both Samsung and SK hynix faced tough cycles during the COVID era, resulting in current production constraints. This situation arose from a sharp drop in DRAM production implemented to address dwindling demand in recent years. As Samsung outlines, substantial investments in boosting capacity could trigger an ‘oversupply’ scenario once the current AI-driven demand wanes.

Long-Term Profitability Takes Center Stage

Estimates indicate that DRAM shortages could persist until 2028, prompting manufacturers to engage in ‘short-term’ contracts, ensuring quicker price adjustments in customer quotations. The focus on ‘long-term’ profitability remains crucial for companies like Samsung and SK hynix as the supply constraints on products like RAM and GPUs are unlikely to ease in the near future.