AI drives performance to record levels, but Samsung worries: Could storage supply and demand reverse in 2028?

The wave of AI demand is driving the semiconductor department of Samsung Electronics to achieve its best historical performance this year, but the world's largest memory chip maker is already preparing for the potential downturn of the next cycle. According to sources familiar with the matter, the management team of Samsung Electronics' DS (semiconductor) business unit is jointly assessing with the business support team the possibility of a reversal in the global memory semiconductor market around 2028. The core logic is that with major manufacturers continuing to expand production, by around 2028, the capacity of Samsung, SK Hynix, and Micron will collectively rise to a new level, posing a risk of reshuffling the supply-demand balance. This internal assessment reflects the deep contradictions in the storage industry - the AI infrastructure investment boom is driving demand, but it is also increasing the uncertainty in demand forecasting. Once overinvestment encounters a slowdown in demand, it will backfire in the form of huge losses, a lesson that Samsung has learned firsthand. The AI boom is driving HBM demand, and the direction of expansion this year is undisputed Currently, the storage market is in a period of undersupply. Major tech companies such as NVIDIA Corporation, AMD, Broadcom Inc. have a strong demand for High Bandwidth Memory (HBM), which is expected to continue until next year. In the total sales of DRAM of Samsung Electronics and SK Hynix, the proportion of HBM has exceeded half. Both companies are allocating more capacity to HBM, leading to shortages in ordinary DRAM for smartphones, PCs, and servers. Against this backdrop, there is no disagreement within the industry on the necessity to expand the supply of DRAM and HBM this year. Samsung is advancing the next generation DRAM process conversion at its Hwaseong plant and expanding new production lines. It is expected that Samsung will continue to advance the 10nm 5th generation (1b) DRAM process conversion this year, while ensuring capacity through new line expansion for the 10nm 6th generation (1c) DRAM at its Pyeongtaek plant. SK Hynix continues to aggressively invest in its major production bases such as Icheon, Cheongju, and Yongin, with the newly built M15X plant constructing a next-generation DRAM line. Concentration of capacity release in 2028 poses a risk of supply-demand reversal The core of market concerns is the simultaneous implementation of expansion plans by major global storage manufacturers around 2028. Micron is expanding its DRAM production lines in Singapore and the US, and has been placing large orders for equipment since last year to increase HBM supply capabilities. Considering that construction of production lines typically takes about two years, from around 2028, the capacity of Samsung, SK Hynix, and Micron is expected to collectively rise to a new level. The Yongin Semiconductor Cluster Development Project led by the South Korean government is also an important variable. The cluster will become the core production base for the Korean semiconductor industry, with infrastructure construction and factory construction progressing in phases. It is believed that after the completion of the first phase of investment in the Yongin cluster, additional factories and production expansion will be initiated, and further capacity expansion will be carried out through the second phase of investment around 2028. The supply pressure in the NAND flash field is more pronounced. Unlike the DRAM market dominated by the three strong players of Samsung, SK Hynix, and Micron, there are more participants in the NAND market, with Kioxia and China's Yangtze Memory continuously expanding their technological capabilities and capacity. If the current pace of expansion continues, the point at which NAND supply exceeds demand may be earlier than DRAM. In recent years, NAND price competition has become fierce, and both Samsung and SK Hynix have found it difficult to avoid pressure on profits. Faulty demand forecasting, Samsung strives to avoid repeating the mistakes of overinvestment The abruptness of this current boom has led the industry to deeply reflect on its ability to forecast demand. A source familiar with Samsung's internal situation said, "Just last summer, neither Samsung nor SK Hynix could have predicted the current prosperity, which fully demonstrates how difficult it has become to forecast the market conditions and investment plans in the semiconductor market." The source added, "Because of this, Samsung's business support team is carefully assessing investment decisions, striving to match them with comprehensive market validation and forecasting." Analysts point out that after the AI boom, storage demand is becoming irregular, and the supply cycle is also shortening, making it increasingly difficult to accurately judge production scale and required investments. The challenge for Samsung is how to continue to invest in large-scale next-generation HBM production lines and advanced process conversions while formulating contingency plans for unpredictable slowdowns in demand - as they enjoy the benefits of AI today, they must reserve enough buffer space for the next cycle of downturns. This article is translated from "Wall Street See", author: Zhao Ying; GMTEight editing: Yan Wencai.