Nvidia is arguably the biggest "beneficiary" of Artificial Intelligence (AI) so far, but the recent 10% plunge in Nvidia's stock price and the evaporation of its market capitalization of US$211 billion have triggered concerns in the South Korean semiconductor industry.
The market believes that if even the AI semiconductor market share of Nvidia is likely to shrink, then it is expected to affect the High Bandwidth Memory (HBM) market, which will have an impact on Samsung Electronics and SK Hynix, the two major South Korean manufacturers.
South Korean media Daily Economy, ChosunBiz, and other news outlets reported that as Nvidia's market value plummeted, many people began to doubt that Nvidia's control of 70-80% of the AI semiconductor market advantage can be sustained. They speculate that perhaps in the second half of 2024, the HBM market will undergo a round of price adjustments.
Nvidia's HBM was initially supplied solely by SK Hynix, and rumor has it that Micron has recently begun supplying it as well. Recent rumors indicate that Nvidia may also make price adjustments as the supplies become more competitive.
Nvidia is a major HBM customer, comprising nearly half the HBM market. If Nvidia reduces orders due to weak investment sentiment, it will deal a heavy blow to Samsung and SK Hynix, the two major HBM suppliers.
Previous news pointed out that Samsung intends to supply Nvidia's HBM3E samples, which are now in the final testing stage. In addition, Samsung and 8-layer HBM3E products together with the development of the industry's first 12-layer samples, are also waiting for Nvidia's final approval.
If the high value-added 12-layer products can be successfully validated and yields can increase, it is expected that Samsung will be able to "outperform" its competitors and regain market dominance.
As the competition in the HBM3E market intensifies, there is also fierce competition for the leading position in developing the next-generation HBM4. SK Hynix recently announced its decision to collaborate with TSMC in the development of HBM4, with mass production planned for 2026, and the two sides said they signed a Memorandum of Understanding (MOU) for the collaboration.
The industry believes SK Hynix and TSMC are trying to curb Samsung's HBM "counterattack" through close cooperation. Relevant sources at securities firms in South Korea predicted that from the second half of 2024 onwards, HBM may experience a price decline due to intensified competition, and SK Hynix's market share is expected to decrease.
However, South Korean media reports failed to address whether there are other demands for HBM products from AMD, Intel, or other companies such as Microsoft, Google, and Tenstorrent that are building their customized AI chips, and their impacts on the HBM prices.
In addition to the possible price decline of HBM due to fierce competition, foundries may also face an oversupply situation. Over the past few months, the outlook for the foundry industry has been quite optimistic due to the surge in AI semiconductor orders, but recently, as order growth has slowed down, different voices have begun to emerge in the market.
In a recent press conference, TSMC said it is adjusting the global foundry production value growth projection from 20% to 14-19% in 2024. The recent large capital expenditures by some industry players have also aroused the industry's concern about the possible oversupply of foundry capacity.
TSMC has decided to build four more state-of-the-art factories in the US and Japan, while Samsung and Intel plan to build two or more new factories in the US respectively. Japan's Rapidus is also building a factory in Hokkaido, so at least 10 new advanced-node fabs will be built around the world in the next five years.
While there are voices of concern in the industry, some are optimistic, pointing out that the market is still growing steadily and that the oversupply is a false alarm.
