Major investment announcements from Samsung Electronics Co., Ltd. and SK Hynix have prompted a warning from a Morningstar equity analyst. The analyst, JingJie Yu, noted that the total investment commitment for SK Hynix's Yongin semiconductor cluster is estimated to have reached approximately 600 trillion won.
He cautioned that if new commitments represent independent investments, it could signal a significant risk of oversupply over the next decade. This uncertainty contributed to a decline in the companies' share prices today (June 29th).
Yu maintains the view that memory pricing will remain cyclical in the long term. He expects new production capacity to take at least two to three years to come online. Initially, demand is anticipated to outstrip supply.
However, he warns that oversupply typically occurs later in the cycle when peak production capacity coincides with a slowdown in demand. The analyst believes that intensified memory chip shortages, coupled with long-term agreements and strong cash generation by memory manufacturers, are driving a wave of capacity investments.
He concluded that this trend will be difficult to sustain over a ten-year period unless the return on investment for hyperscale cloud service providers can consistently keep pace with ongoing volume and price growth throughout the entire period.
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