Korean chip giant, All in HBM

SK Hynix is ​​increasing spending on advanced chip packaging, hoping to better meet growing demand for a key component in artificial intelligence development: high-bandwidth memory.

Lee Kang-Wook, a former Samsung Electronics Co. engineer who now heads packaging development at SK Hynix, said the Icheon-based company will invest more than $1 billion in South Korea this year to expand and improve the final steps of its chip manufacturing. . Innovation in this process is at the core of HBM's advantage as the most popular AI memory, and further advancements will be key to reducing power consumption, improving performance and solidifying the company's leading position in the HBM market.

Lee focuses on advanced methods of combining and connecting semiconductors, which are becoming increasingly important with the advent of modern artificial intelligence and its ability to digest large amounts of data through parallel processing chains. Although SK Hynix has not disclosed its capital expenditure budget for this year, analysts on average estimate the figure at 14 trillion won ($10.5 billion). This suggests that advanced packaging (which may account for a tenth of this) is a major priority.

Lee said in an interview that "the first 50 years of the semiconductor industry have been the front end," which is the design and manufacturing of the chips themselves. "But the next 50 years will be all about the back end, which is packaging."

The first company in this race to achieve the next milestone can now catapult the company into industry leadership. SK Hynix was selected by Nvidia Corp. to provide HBM for its standard-setting artificial intelligence accelerator, pushing the Korean company's value to 119 trillion won. The company's shares rose about 1% in Seoul on Thursday and have gained nearly 120% since the beginning of 2023. The company is now South Korea's second-largest company by market capitalization, outperforming Samsung and U.S. rival Micron Technology Co.

Lee, 55, helped pioneer a novel approach to packaging third-generation technology, HBM2E, which was quickly copied by two other major manufacturers. This innovation was crucial for SK Hynix to win Nvidia customers in late 2019.

Lee has long been interested in stacking chips to achieve higher performance. In 2000, he received a PhD in microsystem 3D integration technology from Tohoku University, Japan, under the tutelage of Mitsumasa Koyanagi, who invented stacked capacitor DRAM for mobile phones. In 2002, Lee joined Samsung's memory division as chief engineer, leading the development of 3D packaging technology based on through silicon vias (TSV).

This work later became the basis for the development of HBM. HBM is a high-performance memory that stacks chips together and connects them with TSVs for faster, more energy-efficient data processing.

But long before the smartphone era, Samsung was making bigger bets elsewhere. Global chipmakers typically outsource the task of assembling, testing and packaging chips to small Asian countries.

So when SK Hynix and US partner Advanced Micro Devices Inc. launched HBM to the world in 2013, they faced no challenge for two years until late 2015 when Samsung developed HBM2. Three years later, Lee joined SK hynix. They joke, with a hint of pride, that HBM stands for "Hynix's Best Memory."

"SK hynix management has a deeper understanding of where the industry is heading and is well prepared," said Sanjeev Rana, Korea analyst at CLSA. "When the opportunity comes, they use it to Grabbed it with both hands." As for Samsung, "They were caught napping."

ChatGPT launches in November 2022, which is the moment Lee has been waiting for. At the time, his team, with the help of his contacts in Japan, developed a new packaging method called Massive Reflow Molded Underfill (MR-MUF). The process involves injecting a liquid material between layers of silicon and then hardening it, which improves heat dissipation and yields. According to a person familiar with the matter, SK Hynix has cooperated with Japan's Namics Corp. on the material and related patents.

Lee said that SK hynix is ​​putting most of its new investments into advancing MR-MUF and TSV technologies.

Samsung, which has been dogged by a succession saga at the top for years, is fighting back. Nvidia endorsed Samsung's HBM chips last year, the Suwon-based company said. On February 26, it developed the fifth-generation technology HBM3E, which has a 12-layer DRAM chip and the industry’s largest capacity of 36GB. On the same day, Boise, Idaho-based Micron surprised industry observers by saying it had begun volume production of the 24GB, eight-layer HBM3E, which will be Nvidia's H200 Tensor Core unit shipped in the second quarter. a part of.

Lee is committed to expanding and enhancing domestic technology and plans to build a multi-billion-dollar advanced packaging facility in the United States, so he remains optimistic about SK Hynix's prospects in the face of increasing competition. He believes that current investments lay the foundation for meeting additional needs for future generations of HBM.

The boom in artificial intelligence has created a sharp divide in South Korea's stock market: Memory chip maker SK Hynix has soared more than 16% this year, while larger rival Samsung Electronics has languished.

SK Hynix is ​​a leading producer of high-bandwidth memory (HBM) chips that are used in conjunction with Nvidia's graphics processors to enable powerful artificial intelligence computing. Explosive demand for AI chips and servers has caused SK Hynix's share price on the Korean stock market to rise 16.5% this year.

Meanwhile, chip giant Samsung Electronics' shares fell 8% over the same period as it struggled to catch up in the field of artificial intelligence.

Hi Investment & Securities said in a report last week that SK hynix "enjoys a high valuation due to its dominant competitiveness in the HBM field and its commitment to developing the artificial intelligence industry." "With the company likely to remain competitive with HBM this year, we believe the stock will maintain its relatively positive trend."

Samsung is the company with the highest market capitalization in the benchmark KOSPI index, followed by SK Hynix. The unusual differences between the two come as global semiconductor companies seek to capitalize on the artificial intelligence boom sparked by OpenAI's launch of ChatGPT. Nvidia's market value has nearly doubled in the past six months as the U.S. company's graphics processing units (GPUs) are critical for artificial intelligence computing.

Trendforce, a Taipei-based market analysis company, said that SK Hynix, as a leader in HBM technology, is Nvidia's main supplier.

"SK Hynix is ​​ahead of other manufacturers with its HBM3 products and is a major supplier of NVIDIA server GPUs. Samsung, on the other hand, is focused on filling orders from other cloud service providers," Trendforce said in a report in January.

SK Hynix jointly developed the world's first HBM product for gaming chips with AMD in 2014. The two companies are also joining forces to develop high-bandwidth, three-dimensional stacked memory technology and related products.

In August, SK Hynix developed HBM3E, which is currently the highest specification DRAM suitable for AI applications. The chip can process up to 1.15 terabytes of data per second, equivalent to more than 230 Full HD movies, each 5 GB in size.

SK hynix CEO Kwak Noh-jung said at CES in January: "We are providing the market and industry with diversified products with ultra-high performance, such as HBM3 and HBM3E, which are the best and most sought after in the world. product."

Nomura is optimistic about the demand outlook. "Demand for HBM has been extremely strong during the AI ​​server boom, as technology advancements by AI companies and commercial utilization in both enterprise and consumer markets have been better than expected," the company said in a report last week.

The brokerage further raised the target price of SK Hynix stock, expecting the company to maintain its leading position in the industry. Hi Investment & Securities last week raised its target price to 169,000 won per share from 125,000 won in November.

Meanwhile, Samsung is developing its own HBM chips to catch up. The company last week announced the development of HBM3E 12H, the industry’s first 12-stack HBM3E DRAM and the highest-capacity HBM product to date. Samsung said it will begin mass production of the chip in the first half of this year.

Investors were not surprised by the news, though. The company's shares rose just 0.1% on the day. Its shares have been hovering around 73,000 won since February, after falling 7.4% in January.