Upon the current status of the semiconductors market after the super cycle ended last year, South Korean chipmakers are refusing to recede back to the “game of chicken” of the 1990s, instead opting to prepare for another big leap, according to industry officials Wednesday.
Concerns have been raised by some market watchers ahead of the completions of two NAND flash chip plants by Samsung Electronics this year that such an aggressive preparation by the world’s biggest memory provider could further aggravate the current oversupply problem and even invite another industrywide “game of chicken” in the global semiconductors market.
The game of chicken refers to the price war among around 20 memory chip companies in the 1990s to reduce their inventories by selling stock at increasingly lower prices. The competition was so fierce that only three — Samsung, SK hynix and US-based Micron — remained after 2010.
Due to the accumulation of memory chip inventories at Samsung Electronics and SK hynix since the fourth quarter of last year, industry watchers have said the two biggest memory providers would try to sell the stock at lower prices than before, aggravating the oversupply problem.
However, the companies vow it will be almost impossible to see the global semiconductors industry enter another round of chicken like in the 1990s, and that they are ready to tackle the oversupply and falling price issues with timing strategies.
“The NAND flash plants will be completed this year, but their schedules for mass production are not confirmed yet,” said a Samsung official. “This year, the plant operation plans are being devised in a very careful manner. We will decide on the time to invest in new equipment and production by closely watching the market demand.”
There have been rumors that Samsung has moved forward the timelines for its new plants in Xian, China and Pyeongtaek, Gyeonggi Province to the end of this year.
The rumors circulated after Samsung heir Lee Jae-yong visited Xian earlier this month to check on the construction process of the China factory, which a Samsung official denied.
Both Samsung and SK hynix have announced through their earnings calls last month that the companies will put off production ramp-ups and equipment investment for their new fabrication plants this year.
“The chicken game is a thing of the past,” said an industry insider. “The market is being largely led by Samsung and SK hynix, so if they adjust their production growth in a reasonable manner, the market would prosper again in the second half of the year.”
“The new NAND flash fabs are being prepared for likely growth in demand after the second half of this year, when the fifth-generation network era really begins and demand for larger-storage SSDs (solid-state drives), PCs and mobile devices pick up again,” an official at SK hynix said.
By Song Su-hyun (firstname.lastname@example.org)