South Korea’s SK Hynix plans to expand its legacy chip production capacity at its chip manufacturing facilities in China, market research firm TrendForce said.
The world’s second-biggest memory chip maker’s long-term strategy involves shifting its capacity expansion back to South Korea, while its China chip production site caters to domestic demand in China and the legacy DRAM memory chip market, the TrendForce report said.
SK Hynix did not comment.
The report said SK Hynix had planned for its China factory to lower the output of legacy chips, but SK Hynix had instead decided to increase production capacity of them due to the U.S. curbs on exports of chip-making equipment to China, requiring licenses for U.S. companies to export advanced chips and chip-making equipment in a bid to slow China’s technological advance.
Last October, the US Department of Commerce imposed semiconductor restrictions on Chinese imports of equipment for processes of 18nm and below. SK Hynix’s Wuxi fab was granted a one-year production license, but geopolitical risks and weak demand prompted the company to reduce wafer starts by about 30 percent per month in 2Q23, according to TrendForce.
In March, SK Hynix’s chief executive said it will ask the United States for a year’s further exemption from the curbs.
Last year, SK Hynix said it had received authorisation from the U.S. Commerce Department for a year to supply equipment needed for chip production in facilities in china, without seeking additional licensing requirements.
TrendForce reports that SK Hynix had planned to transition its Wuxi fab’s mainstream process from 1Y nm to 1Z nm, decreasing the output of legacy processes. However, due to limitations imposed by the US ban, the company instead opted to increase the share of its 21 nm production lines, focus-ing on DDR3 and DDR4 4Gb products.
DDR3 and DDR4 4Gb chips account for less than 30 percent of SK Hynix’s consumer DRAM shipments. However, the company is extending its legacy production lines, which means the supply of low-density consumer DRAM will gradually increase.
TrendForce said though DRAM suppliers have cut back on consumer DRAM production, the current state of supply and demand is leaning towards an oversupply when considering inventory levels. Consequently, 2Q23 should see an average price drop of 10–15 percent. In the long run, increased output from the Wuxi fab could put additional pressure on suppliers, making it even more difficult for consumer DRAM prices to rebound.