Samsung, Hynix, NAND subtraction review

Samsung Electronics and SK Hynix are considering a plan to gradually reduce NAND flash production starting this month. In the midst of a surge in inventories due to the semiconductor recession, the Japanese government chose to regulate the export of core materials.

According to the semiconductor industry on September 9, Samsung Electronics and SK Hynix are scaling the timing and scale of the massive NAND flash production cuts in the second half of this year. Unlike DRAM, NAND flash is a memory semiconductor that preserves data even when power is lost.
Samsung Electronics is known to have set a strategy to reduce the supply of etching gas (high-purity hydrogen fluoride), which is widely used in the semiconductor manufacturing process, from the NAND production deficit, which is blocked by Japan’s export regulations. Securities analysts estimate that Samsung Electronics posted a loss of about W300bn from the NAND business in the second quarter. SK Hynix is ​​facing a loss of several hundred billion won from 1Q11.

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“If the Japanese export regulations are prolonged, Samsung Electronics and SK Hynix’s NAND production cutbacks will increase sharply,” a representative of a semiconductor supplier said.

Samsung Electronics and SK Hynix have begun to examine NAND flash production cuts in earnest, which means that they are looking at avoiding the problem of ‘stoppage of factory operation’. It is calculated that it will make the most of the time until political and diplomatic tensions between Japan and Japan, triggered by Japan’s “economic retaliation,” are lowered from its low profitability rate. If the Japanese government controls semiconductor core material exports for a long time, DRAM production, which accounts for more than 70% of global market share by SEC and Hynix, is at risk. That’s why global information technology (IT) companies that are receiving DRAM and NAND flash are keenly aware of the situation.

○ Samsung Electronics unprecedented reduction, why?
According to the semiconductor industry on September 9, Samsung Electronics and SK Hynix have paved the way to reduce NAND flash production when they announced their 1Q results in April. “We will work to optimize the production line” (Vice President, Samsung Electronics), “NAND flash wafer input capacity can be reduced by more than 10% this year,” said Chin Jin-suk, vice president of SK Hynix. At that time, however, there was a condition that “it depends on market conditions and inventory levels.” Both companies are forecasting that demand for semiconductors will gradually recover from the end of the second quarter. Rather than actively reducing production, it is the background that we chose to pursue a strategy of holding inventories until demand is resurrected.

The ‘megaton’ issue, which has shaken up this production strategy, is the Japanese government’s ban on the export of semiconductor display core materials. This is due to the fact that the supply of three materials – etching gas (high purity hydrogen fluoride), photoresist (photosensitive liquid) and fluorine polyimide – which are used in various semiconductor manufacturing processes, It is known that etching gas is particularly problematic. The etching gas is used for ‘etching’ to remove unnecessary portions of semiconductor wafers and ‘cleaning’ to clean impurities. DRAM, NAND flash, and mobile application processor (AP). Park Jae-keun, a professor of electronics engineering at Hanyang University, said, “If the etching gas inventory goes down, the production line will stop in the order of minimizing the damage,” he said. “The production cut is a temporary measure to slow down the extreme situation of shutting down the plant.”

The reason for considering subtraction from NAND flash is that the more factories turn around, the more deficits are made. According to market researcher IHS Markets, the average price of one gigabyte (GB) of NAND flash, which had been around $ 0.3 in the first quarter of last year, dropped to a tipping point of $ 0.152 in the first quarter of this year. In the same period, Samsung Electronics and SK Hynix have lower 1GB NAND flash manufacturing costs ($ 0.155 ~ $ 0.166). Samsung Electronics and SK Hynix have reported operating losses of tens to hundreds of billions of won in the second-quarter NAND business. One of the reasons for this review is that it says “I want to cry but it is cheeky”.

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○ The US and Japanese competitors’
In the semiconductor industry, Samsung Electronics, the world’s No. 1 NAND flash maker, is unequivocally weighing the timing and volume of production. In 2008 ~ 2009, when the last “chicken game” was held in the semiconductor industry, production was not artificially reduced.

In fact, if Samsung Electronics and SK Hynix cut production, the global NAND flash transaction price will have a significant impact. Samsung Electronics (38.5%) and SK Hynix (11%) accounted for 50% of the NAND flash market share last year. Micron, Inc., the world’s largest maker of semiconductor products, The Yokkaichi Semiconductor Line, a joint venture between Toshiba and Western Digital, the world’s second- and third-largest maker, is also reportedly not operating smoothly since the outage last month.

As Japan’s export regulations are lengthening, if Samsung Electronics and SK Hynix cut back on DRAM, shockwaves to the market are expected to be larger. Samsung Electronics (42.8%) and SK Hynix (29.6%) accounted for 72.4% of the DRAM market last year.
  “If DRAM and NAND prices soar as Korean memory makers cut prices, global IT companies such as Amazon, Google and Huawei will be hit by these products, but competitors from Korean companies such as Micron, Intel, Toshiba and TSMC will benefit “He said. “Governments and companies around the world are looking into the benefits of the Japanese government’s export controls,” he added.

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