Silicon Wafer Under Cleanroom Fabrication & Testing
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Toshiba and Samsung Invest in NAND Production in Face of Demand Uncertainty

Toshiba Invests in New Iwate Facility, Samsung Invests in Pyeongtaek Capacity

Toshiba Memory Breaks Ground on Iwate Facility as it Breaks Bread with Western Digital

Following an extended legal battle with its partner, Western Digital, over Toshiba’s sale of its NAND flash memory to an international coalition led by U.S. private equity firm Bain Capital, Toshiba Memory and Western Digital came together at the end of July 2018 for the groundbreaking on a new chip fab complex in Iwate prefecture.  The investment of roughly $9 billion in the new facility is a critical move if Toshiba Memory hopes to continue to compete with Samsung Semiconductor in this market.  In addition to the capital investment, the healing of ties between Toshiba Memory and Western Digital is essential if they hope to pursue the technology development that is essential for NAND flash product development. After a period of mistrust and severing of cooperation the two companies are restoring trust and resuming their technology sharing relationship. Operations at the Iwate facility are planned to begin in 2020.

While construction of the Iwate facility was delayed, production capacity had become strained at Toshiba Memory’s Yokkaichi fab. Western Digital intends to invest in both facilities moving forward. Toshiba Memory executives hope to build a second and third fab at the Iwate site in the future, but they will be challenged by Samsung as they work to secure future funding.  With the never-ending progress of memory technology, Samsung Semiconductor “has forged a lead of several months in the stacking of memory units to increase storage space,” according to Akira Minamikawa, IHS Markit semiconductor analyst.

Samsung Announces Major Investment Plans

On August 8, 2018 Samsung announced plans to invest $22 billion over the next three years in the areas of artificial intelligence (AI), 5G, automotive electronics components and biopharmaceuticals. Samsung’s announcement specifically noted that it will “expand investments in manufacturing hubs, including in Pyeongtaek (A Samsung memory IC facility), to maintain global technology leadership.”  It noted that, “In addition to investments for memory products, spending will include those for non-memory and new advanced manufacturing equipment.”  The specific amount to be invested in semiconductor production has not been announced but given the key role semiconductors play in driving Samsung profitability it is  safe to assume a significant amount of its investments will be directed to the semiconductor business, including capital investments in production capacity.

Commenting on the Toshiba Memory and Samung investments, Mike Howard, Memory Analyst at Yole Developpement, expressed is view that Toshiba Memory’s investment, “is very much in line with Samsung's investments in NAND...all suppliers for that matter. Samsung's Pyeongtek site, for example, has enough room for nearly 2 million wafers of capacity. Samsung won't add it all at once but it clearly understands that it will need a lot more cleanroom space in the long run.  Howard also emphasized that Toshiba Memory needs to continue to (invest.) It was perhaps a little late to the 3D NAND transition (partly enabled by its extremely competitive final planar NAND product). It needs to continue its transition to 3D NAND and push forward to the ~96 Layer node. Things are only getting more difficult and more expensive, there will be no easy path forward for any memory supplier.”

What Does the Supply / Demand Outlook Mean for NAND flash memory prices

A few days after Samsung’s announcement of its $22 billion investment plans, Samsung Electronics shares took a hit following a report from Morgan Stanley that warned of an inventory surplus for the semiconductor market.  It downgraded its rating for the semiconductor industry from in-line to cautious, in spite of the semiconductor market outperforming market expectations in recent years.  Morgan Stanley’s report warned, “Cyclical indicators are flashing red. Elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction.”

Mike Howard, Yole Developpement Analyst, expresses a more confident view of supply/demand and pricing stability in light of recent CAPEX investment plans.  He explains “With each successive generation of 3D NAND, wafer throughput goes down and greenfield wafer capacity has to be added to compensate for this loss. In general, even with the wafer additions across the NAND industry we expect supply growth to actually decelerate over the next several years. While the price increases that we saw in 2017 aren't expected to happen again anytime soon, we expect the market to move to better balance in 2019 (and thereby smaller price declines vs. 2018).

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