Expanding DDR5 packaging and testing outsourcing by focusing on Samsung HBM
Work transfer to back-end process companies such as SFA Semiconductor and Hana Micron
The increase in HBM production is changing the work of semiconductor back-end process companies. As Samsung Electronics prioritized allocating DRAM production capacity to HBM and reorganized its post-processing lines to focus on HBM, some of the existing DDR5 packaging and testing volume began to be transferred to external specialized companies. This change in production structure is also behind the sharp rise in back-end manufacturing stocks last month.
Samsung Electronics (005930) predicted that HBM's share of the total wafer production capacity of global DRAM companies will increase from the current 20% to close to 30% next year. As HBM production increases faster, the supply capacity for general-purpose DRAM using the same production capacity narrows.
Kim Tae-woo, vice president of Samsung Electronics' memory division, also explained on the 29th of last month that the expansion of HBM production could limit the supply of general-purpose DRAM, citing the fact that HBM and general-purpose DRAM compete for the same wafer production capacity.
Let’s focus production capacity on HBM… DDR5 supply is also tight
HBM is a high-value memory that increases data processing speed by stacking multiple DRAMs vertically. DDR5 is the latest generation standard for general-purpose DRAM that is widely used in servers and PCs. HBM consumes more wafers than general-purpose DRAM, so as the production proportion increases, the production capacity to return to existing DRAM decreases.
KB Securities analyzed that even if Samsung Electronics' DRAM production capacity increases, the increase in general-purpose DRAM supply will be limited as new facilities are prioritized for HBM and high-capacity products for servers.
Signs of supply shortage are already appearing in high-capacity DDR5 for servers. As of September, the lead time was up to 52 weeks, which was significantly longer than the 6 weeks in the normal market. It can take up to a year to receive a product after ordering.
Kim Dong-won, head of KB Securities' research division, pointed out the possibility that general-purpose DRAM supply shortages will continue, citing the fact that a new product line called HBM has come to use 30% of the total DRAM wafer production capacity in just two to three years.
HBM's production increase is not limited to changes in product mix. They are even changing which memory to allocate limited production capacity to first.
DDR5 released from Samsung... Move work to a post-processing company
The point where this change directly meets post-processing companies is packaging and testing. Samsung Electronics is reorganizing the back-end process line at its Onyang plant to focus on HBM in line with the expansion of HBM production. Some of the general-purpose memory post-processing volume that was previously processed internally is being moved externally.
SFA Semiconductor is expanding DDR5 packaging and final inspection volume. Hana Securities estimated that the company's DDR5 test sales will increase approximately 4.8 times from 356 Billion Won last year to 1,692 Billion Won in 2027. This is a representative example of Samsung Electronics' expansion of DDR5 outsourcing leading to sales for back-end process companies.
Memory back-end process companies such as Hana Micron, Hanyang Digitech, and Afact have also recently come into the market's interest.
As Samsung provides more facilities to HBM, the existing DDR5 back-end process volume will be pushed out. This is the background to the recent increase in work for back-end process companies.
Back-end processing shares soar in a month... Expectations are already reflected in the stock price.
The stock market's reaction was quick. While the KOSDAQ index rose 2.3% last September, SFA Semiconductor rose 89.1%, Hanyang Digitech rose 55.1%, Afact rose 52.8%, and Hana Micron rose 33.2%.
In the early days of HBM investment, cutting-edge equipment and materials first attracted market attention. Now that production has increased, orders are coming even from companies in charge of packaging and testing. As the initial investment shifted to production expansion, the market's focus broadened from equipment and materials to the area of processing actual quantities.
However, expectations for increased outsourcing are largely reflected in recent stock prices. Even for the same back-end process company, the speed at which it is reflected in performance may differ due to differences in the processes in charge, customers, and facility capacity.
Last month, related stocks rose together, but it is difficult to guarantee the same trend in the future. The criteria for determining each company's performance are how much outsourcing leads to actual sales and whether the increased operation rate leads to improved profitability.
