Why did SK Hynix make a $106.6 billion gamble?

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On February 21, Reuters reported that SK Hynix said on Thursday that it plans to invest 120 trillion won (about 106.66 billion US dollars) to build four semiconductor factories in new industrial parks in South Korea.

"Starting in 2022, we will invest 120 trillion won to build new semiconductor factories over a decade. This will be a long-term investment plan and the specific details will change with market conditions," a SK Hynix spokesperson revealed.

SK Hynix said it will invest $106.6 billion to build four new semiconductor factories, which will be used to produce next-generation memory products.

Currently, SK Hynix's memory products mainly include DRAM and NAND Flash. According to SK Hynix's 2018 financial report, 80% of its revenue comes from DRAM, while NAND Flash only accounts for 18%. It can be seen that SK Hynix's main memory product is DRAM. Once the DRAM industry shows a downward trend, the single profit source will significantly increase the risk.

DRAM prices have been falling recently. According to a survey by TrendForce DRAMeXchange, the DRAM industry was still in oversupply in the first half of 2019, causing prices to continue to fall. Affected by the off-season effect in the first quarter, coupled with the high inventory level from the fourth quarter of last year, buyers are still reluctant to buy. In January alone, the price of each product has fallen by more than 15%. It is expected that prices will continue to fall in February and March, and the overall decline in the first quarter will exceed 20%, and the decline in server memory is likely to expand to nearly 30%.

In view of this, SK Hynix urgently needs to find a new revenue growth point to get rid of the current sluggish DRAM market. Therefore, the next generation of memory products will emerge. So what is the next generation of memory products that SK Hynix has high hopes for?

At present, the construction of four new semiconductor plants is partly for expanding production capacity and partly for upgrading storage technology. Xinshiye believes that SK Hynix's next-generation memory product is likely to be MRAM. MARM (Magnetic Random Access Memory) is a non-volatile magnetic random access memory that has the high-speed read and write capabilities of static random access memory (SRAM) and the high integration of static random access memory (DRAM), and can basically be repeatedly written indefinitely.

Performance comparison of various memory types

Compared with other storage technologies, MARM can achieve a better compromise in speed, area, number of writes and power consumption. Therefore, it is considered by the industry to be one of the potential access devices for building the next generation of non-volatile cache and main memory.

As early as 20 years ago, IBM's laboratory took the lead in the research and development of MRAM, and made many breakthroughs in the research and development of the first-generation astroid-MRAM and the second-generation STT-MRAM, making great contributions to the development of MRAM.

In recent years, major semiconductor manufacturers such as Samsung, GlobalFoundries, TSMC, and SK Hynix have also accelerated the deployment of STT-MRAM. Currently, there are more than 20 companies in the United States, Japan, South Korea, Taiwan, and other countries and regions committed to the research and development of MRAM products.

As can be seen from the figure, SK Hynix obtained the patent license of Grandis MRAM in 2008 and began to get involved in STT-MRAM. In order to speed up the pace of incorporating MRAM into the memory product portfolio, SK Hynix subsequently announced cooperation with Samsung, Toshiba and other companies. In 2016, SK Hynix and Toshiba developed a 4G STT-MRAM chip sample. After three years, SK Hynix's MRAM technology must have made a lot of progress.

Let’s first take a look at the approximate scale of SK Hynix’s investment of US$106.6 billion.

NetEase's total revenue in 2018 was US$9.768 billion, Alibaba's total revenue in 2018 was US$37.335 billion, and TSMC's revenue in 2018 was US$33.435 billion. SK Hynix's total revenue in 2018 was US$35.9 billion, and the first phase of the Big Fund raised US$20.691 billion. The second phase of the Big Fund, which is still in the financing stage, will raise more than US$22.377 billion.

According to the above analysis, apart from the investment in expanding production capacity, it can be seen that SK Hynix is ​​spending a huge amount of money on MRAM. Investing $106.6 billion to build four new semiconductor plants cannot be said to be a gamble, but why does SK Hynix dare to play such a big game?

As mentioned above, MRAM is regarded as one of the potential access devices for building the next generation of non-volatile cache and main memory. Therefore, its potential commercial value in the future is extremely high.

Embedded MRAM is gaining traction in more consumer products as manufacturing costs fall and other memory technologies face scalability challenges. Importantly, as new process technologies are developed, the size of the SRAM cell does not shrink with the rest of the process, making MRAM increasingly attractive.

According to foreign media reports, GlobalFoundries, Samsung, TSMC and UMC have planned to use embedded memory ST-MRAM or STT-MRAM to replace NOR Flash.

In addition, at the 64th International Electron Devices Meeting (IEDM), Intel and Samsung, the world's two largest semiconductor companies, demonstrated new technologies for embedded MRAM in logic chip manufacturing processes.

Intel said its embedded MRAM technology can achieve a memory period of up to 10 years at 200°C and can achieve persistence over 106 switching cycles. And Intel describes the key features of STT-MRAM (MRAM-based spin transfer torque) non-volatile storage in its 22 FFL process. Intel calls it "the first FinFET-based MRAM technology."

As the storage industry shifts toward smaller nodes, the technology faces severe scalability challenges. In addition to being seen as a candidate to replace traditional memory chips DRAM and NAND, MRAM is also seen as an attractive embedded technology that can replace flash memory and embedded SRAM.

Currently, the global storage industry is dominated by Samsung, Micron, and SK Hynix. Samsung controls about two-thirds of the global DRAM market, while the remaining one-third is divided between Micron and SK Hynix. Samsung and SK Hynix have been developing MARM technology, while Micron has been committed to researching 3D XPoint technology.

Japan's Toshiba Memory has also been busy recently. On February 21, Reuters reported that US private equity firm Bain Capital has selected Nomura Securities and Mitsubishi UFJ Morgan Stanley to handle Toshiba Memory's initial public offering (IPO), which may take place as early as September.

In addition, TSMC's intention to enter the memory chip industry is already very obvious. TSMC Chairman Liu Deyin once said that he would not rule out the acquisition of a memory chip company. As early as 2000, TSMC cooperated with the Taiwan Industrial Technology Research Institute to invest in the research and development of next-generation memory such as MRAM. Previously, TSMC had invested in memory research and development and production, but it withdrew from the memory market due to high costs. In mid-2017, TSMC returned to the memory market and targeted MRAM and RRAM. TSMC's chief technology officer Sun Yuancheng first revealed TSMC's eMRAM (embedded magnetoresistive random access memory) and eRRAM (embedded resistive memory) for many years at the TSMC Technology Forum.

The domestic storage manufacturers in mainland China are still catching up. Currently, Yangtze Memory's projects are progressing most smoothly, but there is still a big gap.

Looking back at the entire history of the semiconductor industry, memory (DRAM/NAND Flash/MRAM) is a "commodity" in the field of integrated circuits. Regardless of the rise and fall of the semiconductor industry, regardless of the development of terminal technology, memory has become a rigid demand like China's real estate.

The more rigid the market demand, the more it attracts investors. As more and more manufacturers enter this field, including TSMC, IBM, Infineon, Tsinghua Unigroup Storage, Hefei Changxin, Fujian Jinhua, etc., competition in the global memory industry will become increasingly fierce.

summary

Chinese people like to study history very much, because they can see the development law of things from history and infer the future development path from it. That is why they use history as a mirror to understand the rise and fall.

For nearly half a century, the semiconductor industries of Japan and South Korea have been able to dominate the market because they made huge bets and investments in the memory industry, which led to their current glorious status. Now, SK Hynix seems to be continuing on this path.

At present, China is also vigorously developing the semiconductor industry, and the key breakthrough is precisely memory. Yangtze Memory Technologies, Hefei Changxin, and Fujian Jinhua are typical representatives. In the fiercely competitive international market, the domestic memory industry must continue to invest funds and increase research and development efforts.

*This article is original by Xin Shiye, some pictures are from the Internet, and the copyright ownership has not been verified. It is not for commercial use. If there is any infringement, please contact us at info@gsi24.com.