SK hynix postpones South Korea plant expansion plan indefinitely

International Business News  –  Nihon Keizai Shimbun (Chinese version: Nikkei Chinese website) has learned that SK Hynix, a large South Korean semiconductor company, has frozen its investment plan for a domestic semiconductor factory in South Korea. The start of construction of a new plant in Cheongju, central South Korea, originally scheduled to start production in 2025, will be delayed indefinitely. The investment in the new plant is 4.3 trillion won, and it was originally planned to mass-produce cutting-edge memory products. Other big players in the semiconductor industry also see a prolonged slump in PC and smartphone sales and have cut back on investment.

SK’s share of the semiconductor memory market ranks second in the world. According to the original plan, construction of a new plant called “M17” will begin in 2023 on a 430,000-square-meter site adjacent to the existing plant, and it will be put into use in 2025. The company is currently mass-producing “NAND-type flash memory”, a semiconductor for storage at its Cheongju plant, and the new plant was previously thought to also mass-produce NAND cutting-edge products.

SK’s board of directors made the decision to postpone the expansion plan indefinitely, according to equipment and material suppliers. Due to China’s epidemic prevention and control and sluggish sales of personal computers and smartphones, the current memory inventory level is high, and it is expected to enter a period of sluggish demand in the next 1-2 years, so the company has postponed equipment investment.

The background reasons for the postponement of the expansion plan also include the increase in the cost of introducing production equipment due to rising raw material prices and the appreciation of the US dollar. The price of semiconductor manufacturing equipment has risen, and the amount negotiated in US dollars, the depreciation of the Korean won, which has hit a 13-year low, and the appreciation of the US dollar have increased the burden on SK. The company adjusted its investment plans amid a combination of reduced demand and increased expenses.

The world’s largest semiconductor companies are also cautious about investing. Micron Technology CEO  Sanjay Mehrotra made it clear at the June earnings conference that “the amount of equipment investment in fiscal 2023 (as of August 2023) will be reduced compared to the previous fiscal year.” The company said it “will reduce new investment to prevent oversupply”.

Samsung Electronics, the world’s largest memory company, announced a policy of “investing in equipment based on the elasticity of supply and demand”, and stepped on the brakes due to expected sluggish demand. The company’s semiconductor investment in January-March 2022 was 6.7 trillion won, down 21% from the same period last year and halved from the previous quarter.