Samsung Electronics is reportedly downsizing its investment in the Pyeontaek P3 fab, so the expansion may eventually end up becoming one-third of the initially-planned scale. This will accompany a natural production cut due to equipment replacement scheduled for upgrading into advanced processing nodes and therefore may have a significant impact on the market.
The P3 fab is one of Samsung's largest production sites. According to Chosun Biz, Samsung was planning to increase the production capacity at the P3 fab by 80,000 DRAM and NAND 30,000 wafers, but now the capacity expansion has been cut to 50,000 DRAM and 10,000 NAND wafers.
Samsung's outlook for market recovery seems to remain conservative, despite a price rebound in the second half of 2023. The downsizing of the P3 expansion investment may imply that Samsung does not expect a significant increase in supply in the coming year, especially in terms of NAND. The fact that the investment cut in NAND is steeper than DRAM also implies Samsung is anticipating a slower recovery in the NAND market.
It is estimated that Samsung's capital expenditure on equipment would amount to KRW36 or 37 trillion (about US$27 billion) in 2023. However, with the latest investment downsizing, the total expenditure may decrease to KRW29 trillion by the end of the year.
Meanwhile, according to a Korean securities house report, with DRAM manufacturing entering the 4th generation 10nm node (1a) and 5th generation 10nm node (1b) processing technologies, there will be significant changes in processing formulae. During the period of upgrading equipment, the production lines will be halted to have new equipment installed. That is exactly why companies would choose to take this action during low seasons so to prevent impacting the output too much. Therefore, due to expansion downsizing and equipment upgrades, the utilization rate of Samsung's memory production lines will be low in 4Q23, and thus its DRAM and NAND supplies may significantly decrease in 4Q23.
In fact, DRAM prices have bottomed out and stayed flat over the past six months, and memory companies have reportedly asked customers to increase contract prices for NAND products. It is widely expected that Samsung, SK Hynix, and Micron are poised to recover from the business cycle and their profitability is likely to resume soon.
Article translated by Judy Lin
