The Zhitong Finance App learned that South Korea's chip inventory showed the biggest year-on-year decline since 2014, highlighting that demand for memory chips, the two major storage giants Samsung and SK Hynix, which contribute nearly 15% of South Korea's GDP, is surging at a much faster rate than supply as global companies speed up their purchases of chips, the core infrastructure needed to develop artificial intelligence technology.

According to data released by the Korea National Bureau of Statistics on Friday, South Korea's chip inventory plummeted 33.7% year on year in April, the biggest drop since the end of 2014, which largely reflects the surge in the scale of South Korea's chip exports. This also indicates that chip inventories have been declining for four consecutive months, while the scale of South Korea's chip exports has continued to rise. With the development and iteration of artificial intelligence technology, global companies' demand for memory chips has surged. SK Hynix has become Nvidia's core HBM supplier, and Samsung is also striving to join the ranks.

The reduction in chip reserves reflects faster export growth — demand for Korean chips is driving an upward trend in overall exports

In addition, data from the Bureau of Statistics also showed that South Korea's chip production increased sharply by 22.3% in April, but it was lower than 30.2% in March. Shipments from Korean factories increased by 18.6%, slightly higher than 16.4% in March.

Most of the global supply of memory chips is in the hands of South Koreans

Korea is home to two of the world's largest memory chip manufacturers. Among them, SK Hynix, the global HBM hegemon, has become Nvidia's core HBM supplier. The Nvidia H100 AI GPU is equipped with an HBM storage system produced by SK Hynix. In addition, the Nvidia H200 AI GPU and the HBM storage of the latest AI GPU based on the Blackwell architecture will also be equipped with the latest generation HBM storage system, HBM3E, produced by SK Hynix. Another major HBM3E supplier is storage giant Micron Technology (MU.US) from the US.

Another major storage giant from South Korea, Samsung, is the world's largest supplier of DRAM and NAND memory chips, and is also recently striving to become one of Nvidia's HBM and a newer generation HBM3E supplier. In the field of DDR series memory chips (such as DDR4 and DDR5), Samsung's market share is far ahead of other memory chip manufacturers. Unlike HBM, which is used on a large scale in AI data centers, DDR series storage is mainly used in PC system main memory, providing sufficient memory capacity and bandwidth to support multi-tasking and processing of consumer electronic data sets. The LPDDR (Low Power DDR) series is used in smartphones.

In terms of the current most popular HBM market in the storage field, as of 2022, the market share of the three original HBM manufacturers was SK Hynix 50%, Samsung Electronics about 40%, and Micron about 10%, respectively. Since SK Hynix was the first in the HBM field, it already entered this field as early as 2016, so it occupied the vast majority of the market share. Some industry insiders said that in 2023, SK Hynix HBM's market share will be distributed around 55%, ranking in an absolute dominant position.

The AI boom that swept through global enterprises in 2023 has led to a surge in demand for AI servers. The world's top server manufacturers such as Dell (Dell) and Supermicro (SMCI) usually use Samsung DDR series and SSDs for the main server storage system in their AI servers, while SK Hynix HBM storage systems are fully tied to Nvidia AI GPUs.

Looking at the main types of chip exports, South Korea's chip exports are mainly concentrated in DRAM and NAND memory chips, but HBM's share in the DRAM segment continues to increase, followed by analog/mixed signal ICs, CMOS image sensors, display driver ICs, power management ICs, etc., but the share of exports is low.

During the 2013-2015 global memory chip boom, inventories showed no signs of increasing for about a year and a half. In the 2016-2017 growth cycle, inventories continued to decline for almost a year.

According to a research report by the Bank of Korea, as the “artificial intelligence boom” drastically boosts chip demand in a manner similar to the 2016 cloud server expansion, the latest wave of chip demand recovery is expected to continue until at least the first half of next year. Nomura, the world's top financial institution, recently released a report saying that as cyclical technology recovery expands to other consumer electronics terminal markets, it will support the entire chip industry to enter the next round of boom, which is expected to continue fully from the second half of this year to 2025.

Two major storage giants support the Korean economy

The chip industry, particularly the memory chip industry supported by Samsung and SK Hynix, can be described as the “core pillar” of the Korean economy, driving the scale of investment in Korea's advanced equipment and industrial construction projects. Statistics show that in the first quarter of this year, South Korea's chip exports increased by more than double digits, driving the Korean economy to grow 1.3% month-on-month, far higher than the 0.6% expected by economists.

According to data recently released by the American Semiconductor Industry Association (SIA), global semiconductor sales for the first quarter of 2024 totaled US$137.7 billion, a sharp increase of 15.2% over the first quarter of 2023. Regarding the semiconductor industry's sales forecast for 2024, SIA President and CEO John Neuffer said in the data report that overall sales in 2024 will increase by double digits compared to 2023.

As a result, the Bank of Korea raised South Korea's economic growth forecast for 2024 sharply last week, reflecting that economic performance is expected to be much better than expected, while keeping policy interest rates unchanged to curb inflationary pressure. However, the Bank of Korea did not raise its inflation forecast for this year.

The South Korean government plans to release the latest export statistics on Saturday. Economists generally expect that under the trend of surging demand for memory chips, South Korea's export volume in May may increase 15.4% over the same period last year, slightly higher than 13.8% in April.