Why Samsung Is Doubling Down On Memory Investments

With the market for storage  products booming, Samsung Electronics (OTC:SSNLF) is doubling down on its semiconductor-focused capital investments, announcing plans to invest an additional 14.4 trillion won (about $12.5 billion) by 2021 into its NAND factory in Pyeongtaek, Korea. The firm also said that it would invest 6 trillion won (~$5 billion) in a new semiconductor production line in Hwaseong, Korea. The Pyeongtaek plant, which recently started production, has already seen an investment of about 15.6 trillion won ($13.5 billion) to date and counts as the single largest fab in the industry. The plant produces Samsung’s latest 4th generation, 64-layer 3D V-NAND chips. 3D V-NAND chips, which essentially stack flash cells vertically in a 3-D structure, allow for higher capacities of storage besides being denser, faster, and less expensive to produce compared to traditional planar NAND. While rivals such as Micron and Toshiba have 64-layer products of their own, Samsung remains the global leader, with a goal of shifting over half of its production to 64-Layer 3D NAND by the end of 2017.

We have a $1,812 price estimate for Samsung Electronics, which is slightly below the current market price.

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Why The NAND Market Is Booming

The storage market is booming, with demand surging and prices rising sequentially over H2’16 and Q1’17. There are multiple factors driving this trend. For one, device manufacturers are increasing memory density on their devices, on account of higher-resolution cameras and the availability of UHD content. For instance, Apple – the largest smartphone manufacturer by revenues – effectively doubled storage capacity across its flagship iPhone line-up last year. Internet and cloud computing companies have been boosting SSD capacity on their servers and data centers, driven by the performance, power, and reliability benefits that SSDs offer versus hard disk drives. Moreover, the growing amount of data gathered from mobile devices and Internet of Things is also creating a demand for greater storage capacity. There are also some transitory factors that have influenced the NAND pricing. For instance, major manufacturers have been transitioning from 2D planar NAND to 3D NAND, creating some supply constraints in the industry. While capacity across the industry will expand over 2018, potentially leading to a slight oversupply, the long-term outlook remains robust. For instance, the growing use of machine learning and AI — which involve crunching large volumes of data — are also expected to boost demand for memory products.

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