SK Hynix invests hundreds of billions of dollars in constructing memory chip factory to keep ahead of China

DRAM prices begin falling after rising for two years since last Q4. What’s more, falling NAND flash memory prices result in SK Hynix having a 32% QoQ decline in Q4 of 2018 and a 28% QoQ profit decline. However, memory and flash memory chips still account for largest share of global semiconductor market as Korean manufacturers holding more than a half share, who will not stop investing due to price reduction cycle. SK Hynix will invest $49 billion to build two memory chip factories. Added up with two wafer foundries built recent years, $107 billion investment during ten years is used to keep ahead of China. Chinese manufacturers will soon join into competition of memory and flash memory industry.  

According to Reuters SK Hynix has announced investing $107 billion in building four fabs on the Thursday. There will be two memory fabs built in the area of 4.5 million square meters in the south of Seoul since 2022, which are next to two existing fabs with about $49 billion investment in next 10 years.

SK Hynix pays a lot in building fabs in order to maintain its competitive edge while China is trying to become advanced among chip manufacturing countries.

Although poor sales of smart phone result in hot chips to cool down, SK Hynix is preparing for demand of 5G and AI technologies. “I believe as early as in between 2023 and 2024 the demand of chips from autonomous car will rise in next ten years, although the demand is weak now.”, said by Kim Young-gun, an analyst of Mirae Asset, who will create more demand for SK Hynix chips as well as 5G market.

SK Hynix’s project accelerates the competition between China and Korea, the world’s largest memory chip exporting country. China always encourages chip manufacturing industry in order to reduce import dependence in trade with America, said by CNBC.

China is the world’s largest chip importing country, whose chip importing value reaches more than $270 billion in 2017 over total import price of oil.

The investment plan needs to be approved by local authority, thus, there will be over 50 suppliers getting into fab in Yongin, 40 miles away from the capital of Korea, said by SK Hynix.

The manufacturer has three plants in Wuxi, China, whose increasing production capacity is undecided. (Note: Besides wafer fab in Wuxi, China, SK Hynix also invests $3.6 billion in constructing )

Olivia Lee, the spokesman, said, “it’s a long-term investment, so our strategy may change as market situation changing.”