Memory Suppliers Are Actually Worried the Demand Boom Won’t Last ‘Too Long’, and Are Already Rethinking Expansion Plans

Suppliers like Samsung and SK hynix are planning to take a rather ‘cautious’ approach to their DRAM plans, as they see a risk of oversupply, according to a report.

Samsung Expects The DRAM Supercycle To Fade Away By 2028, Which Is Why It is Being Cautious With Investments

The DRAM shortages are intensifying each quarter, and this is clearly evident in how contract prices are evolving aggressively, with a triple-digit increase that is beyond shocking. While manufacturers like SK hynix and Samsung are currently capitalizing on unprecedented demand, they are also cautious about expanding output. Chosun Biz reports that Samsung expects the memory shortages to end by 2028, meaning that, to ensure it doesn’t “overinvest” in its expansion plans, it is now aligning with demand forecasts.

It is claimed that suppliers are concerned about entering another DRAM demand ‘downturn’, which is why there are growing concerns about “expanding production facilities”. From a business perspective, Samsung and SK hynix have experienced a sluggish few quarters post-COVID in DRAM demand, as the PC industry didn’t see much momentum in buying new products, and enterprise demand was slow as well. Back then, it created an oversupply that was hard to overcome for Korean suppliers until now.

For now, suppliers are not expected to make any changes to their expansion plans, given that customers are demanding more HBM and DRAM capacity, which is difficult to allocate without adding more production lines. But at the same time, once infrastructure demand slows or becomes consistent, memory suppliers would need to readjust their production levels, which is why any form of overcommitment could lead to trouble for them. SK hynix has already said it would be ‘cautious’ about expanding production in the past.

The only way we see memory shortages being resolved is for suppliers to increase their output capacity, given that infrastructure demand won’t slow down anytime soon. The timeline for when prices could return to normal isn’t specific, but many reports suggest that the current trend of DRAM and consumer product pricing is the ‘new normal’.

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