SMIC, China’s Leading Chip Manufacturer, Faces DRAM Shortages but Urges Customers to Maintain Orders to Avoid Capacity Loss

China’s Semiconductor Manufacturing International Corporation (SMIC) has recently highlighted the challenges posed by memory shortages on global supply chains. The company’s CEO indicated that numerous clients are contemplating reducing their chip orders in response to these supply constraints.

Does Scaling Back Chip Orders Make Sense Amid DRAM Shortages?

Dynamic Random-Access Memory (DRAM) has emerged as a crucial component in the rapidly evolving landscape of artificial intelligence (AI).Its adoption across various AI platforms and products is growing, yet the market has been grappling with memory shortages for several consecutive quarters. This scarcity impacts not only end-users but also significant foundries like SMIC. Zhao Haijun, co-CEO of SMIC, noted that the ongoing memory supercycle is severely affecting the supply chain, particularly for mobile device and personal computer manufacturers.

Memory-related chips and power-related chips are currently in significant undersupply…Now the industry is in this urgent crisis mode to race to secure memory.

We did see some channels and middle layers of the supply chain stockpile a lot of memory because they hope to sell them at a higher price in an undersupplied situation….These inventories could be released later when new capacity goes online later this year.

– SMIC’s co-CEO

According to SMIC, the state of the memory industry is critical. However, the company also reassured clients that suppliers are actively working to enhance capacity. Projections indicate that we may witness a significant rise in DRAM production by 2027. The largest semiconductor foundry in China is advising clients against reducing their order volumes, warning that they may miss opportunities when memory availability stabilizes. By that time, production capacities could already be fully booked.

China's In-House Chips Are Said To Be Just Three Years Behind TSMC, US Curbs Show Little Impact 1 — A picture of the Kirin 9000S, which Huawei mass-produced using SMIC’s 7nm process / Image credits – Bloomberg

Otherwise, if the demand bounces back and new memory capacity goes online in the third quarter, they won’t have enough chips to make their products.

The critical concern for foundries amidst DRAM shortages is the potential inability of their customers to produce final products without adequate memory resources. Recently, TSMC’s CEO C. C.Wei addressed this issue and downplayed the short-term risks, attributing stability to the company’s partnership with major mobile client Apple. However, the long-term implications of DRAM shortages remain uncertain and could become a substantial hurdle for various industries reliant on these essential components.

For further reading, refer to the news source: Nikkei Asia

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