Dynamic random access memory (DRAM) producers are expected to cut their capital expenditures (capex) by an estimated 20 percent year-over-year, reports IC Insights. The research group notes industry leaders Samsung, SK Hynix, and Micron are reducing their DRAM spending after making major design manufacturing investments recently.
High equipment costs and adverse market conditions are prompting the sector’s most prominent players to reallocate their resources.
DRAM Manufacturers to Decrease Capex by $4 Billion
In 2019, the world’s DRAM manufacturers spent $19.1 million upgrading their equipment and building new facilities. However, IC Insights found firms operating in the segment capex will total $15.1 billion this year. The group found the industry’s $4 billion drop off in infrastructure investments is primarily due to its three largest vendors tightening their belts.
IC Insights estimates Samsung will slash its DRAM production investments by 21 percent to $4.9 billion in 2020. The research organization anticipates SK Hynix will cut its capex by 38 percent to $4.0 billion. The analysis company also expects Micron to spend $16 billion in 2020, down by 16 percent from 2019.
The 2020 trend of DRAM capex reductions is not limited to the world’s biggest suppliers. Taiwanese memory vendor Winbound reportedly pushed the launch of its Kaohsiung plant from 2021 to 2022.
Why DRAM Makers Are Reducing Spending
According to IC Insights, large and small DRAM manufacturers are ramping down their production investments for financial reasons. The organization notes the industry sustained a major hit in 2019 when the market slid by 37 percent annually. However, despite that contraction, memory vendors only cut down their capex by 17.67 percent from 2018.
While the coronavirus pandemic created a spike in demand for DRAM products, the global health crisis has had a mixed impact on the sector. TrendForce recently reported end-user inventory hoarding would push the market down by 10 percent year-over-year. Similarly, DigiTimes anticipates flash memory prices will continue to fall into 2021.
IC Insights notes firms now spend between $6 billion and $10 billion to establish new flash memory fabrication facilities. Samsung committed a staggering $26.4 billion into developing a state-of-the-art DRAM and NAND plant in Pyeongtaek, South Korea last year. With ASML charging around $150 million for its cutting-edge extreme ultralight lithography (EUV) wafer etching machines, staying competitive in the microelectronics business is more expensive than ever.
The research organization notes DRAM manufacturers’ recent product capacity upgrades and build-outs will allow them to meet demand. With equipment costs high and product pricing trending downward, DRAM makers are smart to put the brakes on their infrastructure spending.