ICinsights: DRAM capital expenditures plummet
Latest update time：2021-09-03 16:43
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According to well-known analysis agency ICinsights, although the DRAM market is expected to see a mild recovery in 2020, suppliers are very cautious in analyzing market conditions before considering any further upgrades or deciding to move forward with any new DRAM fab plans.
Figure 1 shows the DRAM capex budgets of the three major suppliers. As most new facilities and upgrades to existing fabs are ready to meet near-term demand, both companies are expected to further cut their DRAM capex in 2020. Among the three major DRAM vendors, IC Insights forecasts that Samsung’s DRAM capex budget will drop 21% to $4.9 billion this year, SK Hynix is expected to cut its DRAM capex budget by 38% to $4.0 billion, and Micron is expected to cut its DRAM capex by 16% to $3.6 billion.
Once built, new fabs must operate at very high or full capacity, given the large capital expenditures required to build and equip them. Investing $6 billion to $10 billion only to see only partial capacity would have devastating financial consequences for any supplier. Therefore, DRAM manufacturers will continue to closely monitor capacity and expansion plans in the coming months to limit the potential damage from another supply-demand imbalance.
Samsung, SK Hynix, and Micron will end their DRAM capacity expansions in 2020, and all have made it clear that they will be limited by how fast they can build and upgrade new production lines.
Niche DRAM suppliers like Winbond are also protected. Winbond is building a new plant in Kaohsiung, southern Taiwan. The facility was originally scheduled to be completed by the end of 2020, with commercial production scheduled to begin in 2021. However, the company has now delayed the move-in of the facility until January 2022.
Overall, suppliers are expected to spend $15.1 billion on DRAM capex this year, down 20% from $19.1 billion in 2019 and down from the all-time high of $23.2 billion in DRAM spending in 2018.
Even with the increased capex levels over the past few years, DRAM capex as a percentage of DRAM sales is nothing like what the industry has seen since 2015. However, it is worth noting that as the DRAM market, which accounts for 37% of integrated circuits, collapsed in 2019, DRAM capex as a percentage of sales jumped to 30.5%, the highest level since 30.5% in 2011 (Figure 2).
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