A memory glut and declining demand are forcing memory makers to cut capex...
The DRAM and flash memory booms of recent years are but a fond memory following a market correction exacerbated by the pandemic. The current memory glut and softening demand owed primarily to Covid-19 uncertainties have prompted leading memory makers to scale back capital expenditures for at least the rest of this year as they ponder how far apart are the ends of a hoped-for “U”-shaped recovery.
While memory makers may yet stage a slight rebound, IC Insights nevertheless expects DRAM capex spending to decline a substantial 20 percent this year.
Memory makers, especially market leaders Samsung Electronics, SK Hynix and Micron, “are being very cautious, strategic and thorough in their analysis of market conditions before they consider any further upgrades or decide to move ahead with any new DRAM wafer fab plans,” the market tracker said this week.
Samsung is expected to trim capex spending 21 percent this year to an estimated $4.9 billion; Micron by 16 percent to $3.6 billion. SK Hynix is expected to cut even deeper, slashing fab spending by a hefty 38 percent.
“The biggest factor to our demand forecast is the stabilization of Covid-19 and the recovery timing of global economic activity,” SK Hynix CFO Jin-Seok Cha said in April. “If the economic recession is prolonged, we can’t rule out that even memory demand for servers could slow down.”
The worry of course is that investing in a $10 billion memory fab requires maximum capacity utilization. None of the leading memory makers see that happening until next year at the earliest.
Contributing to the cautious outlook is the fact that Micron, Samsung and SK Hynix are completing DRAM capacity expansions, “and each has made it clear that they will be restrained about how fast they progress with building and ramping their new manufacturing lines,” IC Insights said.
Total capital spending for memory manufacturing is forecast to reach $15.1 billion, or $4 billion less than 2019. DRAM spending in 2018 hit a record $23.2 billion.
Despite a 37 percent market collapse last year, the market tracker said DRAM capital spending as a percent of sales still managed to jump to 30.5 percent, the highest level since 2011.