The AI demand wave is set to drive Samsung Electronics' semiconductor division to potentially achieve its best-ever annual performance this year. However, the world's largest memory chip manufacturer has already begun preparing for the next cyclical downturn. According to informed sources, management at Samsung's DS (Semiconductor) Division, together with business support teams, is jointly assessing the possibility of a reversal in the global memory semiconductor market around 2028. The core logic is that as major manufacturers continue to expand production, the combined capacity of Samsung, SK Hynix, and Micron is expected to collectively leap to a new scale by approximately 2028, risking a reshuffling of the supply-demand balance.
This internal assessment highlights a deep-seated contradiction within the memory industry: while the investment boom in AI infrastructure is driving demand, it has also significantly increased the uncertainty of demand forecasting. Should overinvestment coincide with a slowdown in demand, the consequence would be massive losses, a painful lesson Samsung has experienced firsthand.
Currently, the memory market is in a boom cycle characterized by supply shortages. Strong demand for High Bandwidth Memory (HBM) from large tech companies like NVIDIA (NVDA), AMD (AMD), and Broadcom (AVGO) is expected to persist into next year. HBM now accounts for more than half of the total DRAM sales for both Samsung Electronics and SK Hynix. The two companies are allocating an increasing share of their capacity to HBM, leading to shortages of conventional DRAM for smartphones, PCs, and servers. Against this backdrop, there is no dispute within the industry about the necessity to expand DRAM and HBM supply this year.
Samsung is advancing the transition to next-generation DRAM processes at its Hwaseong campus and building new production lines. The industry expects Samsung to continue its transition to the 10-nanometer fifth-generation (1b) DRAM process this year, while using the Pyeongtaek plant as a hub to secure capacity for the 10-nanometer sixth-generation (1c) DRAM through new line expansions. SK Hynix is actively pushing forward with investment plans at its key production bases in Icheon, Cheongju, and Yongin, where its new M15X fab is under construction for next-generation DRAM lines.
The core market concern lies in the fact that the capacity expansion plans of the world's major memory manufacturers are set to come online simultaneously around 2028. Micron is expanding DRAM production lines in Singapore and the US and began large-scale equipment orders last year to boost its HBM supply capability. Considering that building a production line typically takes about two years, the combined capacity of Samsung, SK Hynix, and Micron is projected to reach a new level starting in 2028.
The South Korean government-led Yongin Semiconductor Cluster project is another significant variable. This cluster is poised to become a core production base for Korea's semiconductor industry, with infrastructure and factory construction progressing in phases. The industry believes that after the initial phase of investment in the Yongin cluster is completed, additional factory construction and mass production will commence, with a second phase of investment further expanding capacity around 2028.
The supply pressure is even more pronounced in the NAND flash memory sector. Unlike the DRAM market, which is dominated by the trio of Samsung, SK Hynix, and Micron (MU), the NAND market has more players, with Kioxia and China's Yangtze Memory Technologies continuously enhancing their technological capabilities and capacity. If the current pace of expansion continues, the point at which NAND supply exceeds demand could arrive earlier than for DRAM. Price competition in the NAND market has intensified in recent years, with both Samsung and SK Hynix struggling to avoid losses.
The suddenness of the current boom cycle has prompted deep reflection within the industry on demand forecasting capabilities. A person familiar with Samsung's internal situation stated, "As recently as last summer, neither Samsung nor SK Hynix could have predicted the current level of prosperity. This fully illustrates how difficult forecasting semiconductor market conditions and investment plans has become." The source added, "Precisely because of this, Samsung's business support teams are conducting prudent evaluations of investment decisions, striving to align them with thorough market verification and forecasting."
Analysts point out that following the AI boom, memory demand has become more irregular, and supply cycles have shortened, making it increasingly difficult to accurately judge the required production scale and investment. Samsung's challenge lies in how to simultaneously advance massive investments for next-generation HBM production lines and advanced process transitions while developing contingency plans for unpredictable demand slowdowns—enjoying the current AI红利 (dividends) while reserving sufficient buffer space for the next potential downturn.
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