On February 23, Alan Estevez, the Deputy Minister of Commerce of the United States responsible for industrial and security affairs, said in a forum hosted by the Center for Strategic and International Studies (CSIS), a Washington think tank, "The United States may set limits on the growth of Korean enterprises in China, and those companies will be required to stay at the current number of stacks, or at a certain level within their technical scope."

In other words, once this measure is implemented, Samsung and SK Hynix's wafer factories in China may not only be able to continue to import equipment to update production lines, but also unable to produce more advanced memory chips, including DRAM and NAND chips with more advanced processes and higher layers after October 2023.

| The price of memory chips has fallen sharply

The price of memory chips fell sharply in the last two quarters of 2022. The latest data from TrendForce, a market research institute, shows that the average price of DRAM fell by 34.4% in the fourth quarter after a sharp 31.4% drop in the third quarter of 2022.

In 2023, the loss of collective operation is estimated to reach a record-breaking US $5 billion. TrendForce predicts that DRAM prices will fall by 13% - 18% this quarter, and NAND Flash prices will fall by about 10% - 15% this quarter. Moreover, it is not possible to see the end of the downward cycle of the industry at present, and this wave of memory chip price decline has not yet seen an end.

The sluggish market performance is continuing to affect the storage chip giants, including Samsung, SK Hynix, Micron, Western Data, South Asia Technology and other large storage companies, which will be hard to avoid heavy loss pressure

| Rapid market cooling spread to the industrial chain

The semiconductor industry has ushered in a downward cycle, and storage manufacturers are suffering.

From the perspective of the market, the sales of the three major storage manufacturers experienced a sharp decline in the third quarter. Samsung Electronics' DRAM sales amounted to 7.133 billion US dollars, down 34.2% month-on-month; SK Hynix recorded US $5.246 billion, down 25.3%; Micron Technology recorded $4.35 billion, down 26.3%. SK Hynix is also expected to make a loss in the fourth quarter, which is the first time in 10 years.

Although the automobile storage market is rising rapidly, in contrast, the automobile storage market is still a small part. According to Yole's latest report, the automobile storage market will only account for 2.6% of the global storage market revenue in 2021. Moreover, the automotive market has specific requirements in terms of quality, qualification, reliability, functional safety and supply life. In Yole's view, the automotive storage business is facing unprecedented challenges and opportunities.

From the technical point of view, under the two high walls of "storage" and "performance wall", the development of traditional storage is becoming more and more difficult.

Storage cell scaling is slowing down due to challenges in process integrity, cost, cell leakage, capacitance, refresh management and sensing margin. The industry has long been concerned about the difficulties faced by traditional storage in process miniaturization, and it will take more time and cost to continue miniaturization. But even so, the storage giants continue to catch up with the advanced technology.

| Polarization will become more prominent in 2023

At present, the global semiconductor market is entering a period of weakness. Influenced by the "cold wave", many chip products, such as sensing chips, energy chips, computing chips and communication chips, have shown signs of declining demand and falling prices. And reducing inventory, reducing investment and reducing production have become the main theme of chip enterprises.

So when will the recovery period of the chip industry come?

Guo Tao, an angel investor expert, said that the trend of the chip industry is expected to be polarized in 2023. On the one hand, the inventory of middle and low-end chip products has remained high, and the price has dropped significantly; On the other hand, the demand of some high-end chip markets is increasingly strong. Due to the slow increase of production capacity and other reasons, the contradiction between supply and demand is still prominent, and even faces the situation of "one core is hard to obtain". However, at present, the scale of chips needed for notebooks and computers still dominates the mainstream, high-end chips are still in the initial stage, and the chip market as a whole is still grim

| What is the trend of storage chips in 2023?

At present, Samsung and SK Hynix both regard China as the largest and most advanced overseas manufacturing base+single market, including seal testing, OEM, etc. South Korean semiconductor enterprises in China are also the most invested and most profitable foreign enterprises, which is beyond doubt.

If the landing is restricted, plus three other Chinese local large-scale memory enterprises that have been seriously affected, there are two possible results in theory: first, the memory process is temporarily "locked", and Chinese Mainland will lose advanced memory manufacturing capacity for a period of time; second, some facilities of foreign-funded enterprises in China will be forced to move overseas in succession

From the perspective of the demand side, the demand for storage chips in the terminal market has begun to decline. In addition to the stock hoarding of many enterprises, the industry expects that the high inventory will ease in the second quarter of this year. However, some analysts pointed out that the time point of inventory relief and semiconductor recovery may be later than expected, and the balance of supply and demand in the second half of the year still needs comprehensive dynamic observation.

From the perspective of the overall chip industry, at the price level, it is expected that the mainstream chip prices will continue to decline in the first half of 2023, and the investment demand for notebook computers, mobile phones and enterprise data construction is expected to gradually recover in the third quarter. Considering the time lag of cycle transmission, it is expected that the chip prices will continue to decline in the fourth quarter.

It is worth noting that at present, the market generally expects that the performance of chip companies will reach the bottom in the middle of the year. TrendForce estimates that the growth rate of DRAM supply will only reach 10.6% this year, and the growth rate of NAND Flash supply will also be revised down to 20.6%, lower than the growth rate in previous years. It can be seen that the original factory is very cautious and conservative about output, which also gives the market an opportunity to show a trend of decline convergence in the second half of this year.