DRAM decline narrows, NAND price rises, and supply and demand recover.

The semiconductor industry is expected to boom in 2020, fueled by the expansion of 5G communications and the increasing use of AI and IoT technologies. Market watchers in Yeouido's financial district unanimously selected semiconductor stocks as the leading stocks of 2020.
In 2018, memory demand exploded as companies like Facebook, Amazon, Google, and Apple entered the cloud business. However, they have since adopted a cautious approach to memory purchases, leading to a buildup of semiconductor inventory. However, with semiconductor companies hinting at supply and demand adjustments and discussions expected to resume regarding the extension of the General Security of Military Information Agreement (GSOMIA) between South Korea and Japan, the semiconductor industry is now in the spotlight.

According to the global DRAM semiconductor sales data for the third quarter of 2019 released by global market research firm DRAMeXchange, domestic semiconductor sales in the third quarter amounted to $15.447 billion (approximately 18 trillion won), a 4.1% increase from $14.844 billion in the second quarter. A slight rebound in DRAM prices and an increase in Samsung Electronics' market share signaled a positive outlook for the semiconductor market, which had been shrinking since the fourth quarter of 2018.

According to DRAMeXchange, Samsung Electronics' third-quarter DRAM semiconductor sales reached $7.119 billion (approximately KRW 8.29 trillion), giving it a 46.1% market share. This marks the highest level in two years since Q2 2017, when it recorded 46.2%. SK Hynix followed with 28.6% and Micron with 19.9%, demonstrating the dominance of domestic semiconductor companies.

The expansion of infrastructure for implementing smart cities, including 5G, AI, and IoT, is expected to continue to drive the semiconductor market's upward trend in 2020.

According to the '2020 Economic and Industrial Outlook Report' released by the Korea Institute for Industrial Economics and Trade on the 25th, semiconductors, a key export item, are expected to alleviate oversupply and drive export growth, with exports expected to increase by 2.5% compared to 2019.

Semiconductor exports are projected to increase by 8.3% compared to 2019, driven by factors such as the recovery of supply and demand balance for memory semiconductors, including DRAM and NAND flash, a slowdown in unit price declines, and increased 5G demand. The semiconductor production growth rate is expected to increase by approximately 10.3% compared to 2019, driven by increased demand due to the expansion of electronic devices for communication and data processing and the transition to finer processes.

In the domestic market, it is expected to increase by 11.0% compared to 2019 due to increased demand for semiconductors related to 5G communications and increased imports of special-purpose semiconductors.

The semiconductor market is shifting from ICT to OT.
Experts predict that the IT infrastructure required for IoT implementation is already saturated, and that OT will lead the future IT industry.

OT (Operational Technology) refers to hardware and software that detects or causes changes in physical processes by directly monitoring and controlling physical devices or processes, and means changing the physical state of a system into hardware or software.

According to the 'Semiconductor Application Forecaster' published by IDC, an IT market analysis and consulting firm, the CAGR (compound annual growth rate) for the next five years from 2018 to 2023 is ▲ICT 69% ▲OT 31%, with the ICT sector decreasing by 10% while the OT sector increased by 10%. The OT semiconductor market is expected to reach $155 billion in sales by 2023, and is attracting attention for its growth potential as a replacement for the saturated PC and mobile sectors.

AI and IoT are driving market growth.
As the use of AI technology increases in endpoint and edge computing, as well as in the automotive sector, the semiconductor market, which requires cloud computing, is expected to grow rapidly.
The semiconductor market is expected to maintain growth through the first half of 2021, driven by the expanding adoption of chips like TPU2 for AI implementation across mobile devices, smart speakers, PCs and tablets, head-mounted displays, automotive sensors, drones, robots, security cameras, wearable sensors, building sensors, and urban facilities. Furthermore, the electrification of automotive applications, particularly autonomous driving, connected cars, and car sharing, is also driving increased semiconductor demand.

Looking at the foundry market share, Taiwan's TSMC (60%) and Samsung Electronics account for 70% of all MS. Experts predict that the future memory market will see growth in the Automotive, Industrial, and Wireless sectors, which is due to changes in the memory market.

Expected mass production of memory up to 1nm
Over the next four years, from 2020 to 2023, memory technology is expected to decline in share until 2020 and then grow from 2022, centered around the 7nm semiconductor market.

After TSMC and Samsung Electronics began mass production of 5nm semiconductors in the first half of 2020, a fierce battle for market share in the 3nm semiconductor market is expected between TSMC and Samsung Electronics in 2021. Mass production of 1-3nm semiconductors is expected to begin in 2023.

DRAM price declines↓, NAND price increases
In the first half of 2019, the DRAM market saw demand decline and inventory increase due to the wait-and-see approach of global companies such as Google, Facebook, Apple, and Microsoft in purchasing memory. In the second half of the year, DRAM demand is expected to increase in the order of server, mobile, and PC, driving demand growth. As a result, DRAM inventory is expected to decrease and recover to normal levels (4-5 weeks) by the end of the year.

From 2020 onwards, the industry outlook is expected to be bright as supply and demand stabilize and supply decreases, but natural demand increases.
In the first quarter of 2020, Samsung Electronics and Hynix will convert their existing DRAM lines to CIS lines, and in the third quarter, Micron will focus on building a new factory.

Furthermore, as 5G industry growth enters a stable phase, DRAM content in mobile and server devices is expected to increase significantly in the fourth quarter, maintaining the supply-demand balance. Consequently, DRAM supply is expected to decrease, while a return to the previous cycle is expected.

In the NAND market, a power outage at a TOSHIBA memory plant in 2019 led to a temporary price increase to cover costs due to reduced supply. However, profitability improved significantly through the third quarter of 2020 due to price increases, and profitability is expected to stabilize in the fourth quarter.

Samsung Electronics and SK Hynix plan to start initial operations at their Xi'an 2 and M15 plants, respectively, in the first half of the year, and prices are expected to rise due to supply shortages. In the second half of the year, NAND oversupply is expected to recur as companies accelerate their investment in new factory equipment. However, prices are expected to stabilize until the seasonal peak demand period and the industry's distribution inventory increase reach a certain level.

From Competition to M&A… Semiconductor Market Boom to Continue Through 2023
The semiconductor industry has recently seen a surge in mergers and acquisitions (M&A). Broadcom acquired Symantec for $1.3 trillion and CA Technologies for $18.9 billion, Renesas acquired IDT for $6.3 billion, and NVIDIA acquired Mellanox for $6.9 billion.
It is a change in strategy from the past method of competing with each other to one of purchasing. The rapid growth of the 5G and AI industries and the expansion of the automotive market are expected to drive a semiconductor market boom.

In particular, if China, with a population of 1.4 billion, accelerates its 5G rollout, which has been stalled due to the prolonged US-China trade dispute, in the lead-up to the 2022 Beijing Winter Olympics, demand for semiconductors is expected to increase explosively.