Instead of transitioning to more advanced production processes in its Wuxi, China fab, SK Hynix will expand its legacy processes at the factory due to the U.S. ban imposed on semiconductor manufacturing equipment to the country, according to a new report from TrendForce.
Originally, SK Hynix planned to transition from a 1Y nm to a 1Z nm and decrease legacy chip manufacturing. But the company instead will increase its share of 21 nm production lines, focusing on DDR3 and DDR4 4Gb products.
The move comes after the U.S. Department of Commerce imposed semiconductor restrictions on Chinese imports of equipment for processes of 18 nm and below. SK Hynix lobbied the U.S. for a waiver to continue to receive advanced semiconductor equipment for its fab in China in a bid to get a similar grace period that was given to the company in October of 2022.
Despite this, SK Hynix reduced wafer starts by about 30% in the first half of this year due to weak DRAM demand and rising geopolitical risks from Taiwan tensions. Long term, SK Hynix’s plan may be to shift its capacity expansion in South Korea and have the Wuxi fab cater to domestic demand in China for legacy process consumer DRAM market. The company has even considered selling the Wuxi fab.
TrendForce said that DDR3 and DDR4 4Gb chips account for less than 30% of SK Hynix’s overall consumer DRAM shipments. This may change however once it expands its legacy production lines at the Wuxi fab.
Given the current status of the DRAM market and the deluge in price drops, expanding these legacy DRAM memory lines will put additional pressure on the market due to more products being on the market meaning an average price drop of 10% to 15%, TrendForce forecasts. This will make it even more difficult for consumer DRAM prices to rebound.
