As I mentioned earlier, I am currently in Korea for vacation. Although this is technically a vacation, I have continued networking and meeting with professionals across the finance and semiconductor industries.
In this article, I will answer the questions you submitted previously while also sharing some of the hottest topics currently being discussed in Korea’s semiconductor industry, particularly in the memory sector.
I strongly recommend reading this article all the way through when you have the time.
By the end, I believe you will have a much clearer understanding of what is currently happening on the ground in the memory industry, as well as the key concerns surrounding the Korean memory business that I was not fully aware of before speaking with these experts.
I am confident that this article will give you a broader and more practical perspective on the current state of the industry.
Let’s get started.
The Memory Power Struggle Hidden from Public View and the Limits of the Memory Business
The memory business has traditionally been one in which suppliers held very little power. For decades, customers largely controlled memory pricing. Whenever the balance between supply and demand broke down, memory companies were forced to endure another downturn, making memory one of the clearest examples of a cyclical business.
However, the rise of AI has shown the potential to break this structure.
As the bottleneck in large scale AI workloads shifted from compute toward memory, demand for memory surged. The memory business was no longer driven solely by ordinary imbalances between supply and demand. Supply shortages gave memory companies a stronger position, while multiyear LTA contracts improved their earnings visibility and bargaining power.
These changes were also among the main reasons behind the recent rise in memory stocks.
Another reason I have continued to maintain a bullish view on memory is that the memory business is moving away from a commodity based cyclical structure and toward the custom market. This transition has been the foundation of my bullish thesis on memory.
However, after visiting Korea and speaking with several industry experts and professionals working in the field, I realized that the situation inside the industry is more complicated. I was also reminded once again of how intense the power struggle surrounding memory has become.
Why has this power struggle become so intense?
I would like to examine that question in detail in this section.
The first thing we need to recognize is that although the memory business is moving toward custom products, it is still largely a commodity based business in which suppliers have limited power. As has always been the case, the greatest weakness of this business is that memory companies ultimately have to meet customer requirements.
One of the most surprising things I heard from multiple industry professionals I met in Korea was this.