Samsung Shifts DDR5/SSD Production to Outsourcing, Focuses In-House Capacity on HBM

Facing a supply crunch in High Bandwidth Memory (HBM) driven by the explosive demand for artificial intelligence, Samsung Electronics is comprehensively adjusting its backend production strategy for memory chips. According to Korean media reports citing industry sources, Samsung has decided to outsource the increased production of DDR5 modules and SSDs for PCs, servers, and laptops entirely to Outsourced Semiconductor Assembly and Test (OSAT) partners, rather than expanding its in-house capacity. This move aims to concentrate limited internal resources on high value-added memory products like HBM.

Tight Internal Capacity Drives Full Outsourcing of General Modules

Samsung is actively urging its OSAT partners to expand production lines to meet the growing demand for general memory modules. Insiders revealed that as early as June last year, Samsung requested partners to invest in expanding production lines for DDR5 general memory modules and SSDs. This year, the company has even advised partners to accelerate their original expansion plans.

The core reason behind this decision is the extreme strain on Samsung's internal production facilities. With the surging demand in the AI semiconductor market, Samsung is repurposing space and equipment at its packaging factories in Cheonan and Onyang, South Korea, to prioritize the construction of advanced packaging lines, including those for HBM. Industry experts noted that Samsung lacks the space to expand existing backend production lines required for AI semiconductor manufacturing. Consequently, even with rising demand for general memory modules, the company has decided against in-house expansion, opting instead to outsource the majority of production.

Outsourcing the production of DDR5 memory modules and SSDs is technically feasible. The assembly of these modules primarily involves mounting pre-packaged DRAM and NAND chips, along with passive components, onto Printed Circuit Boards (PCBs) using Surface Mount Technology (SMT). This process is significantly less technically demanding than advanced packaging for HBM, allowing partner vendors to sufficiently scale up capacity.

Strategic Focus Shifts Entirely to AI Memory

This adjustment reflects a broader shift in Samsung's strategic focus toward AI memory. In recent years, HBM, as a critical component for AI accelerators, has seen demand grow at an annual rate of 70%. Given that HBM offers significantly higher profit margins than general memory and is irreplaceable in AI accelerator designs, Samsung is sparing no effort to boost HBM capacity.
Previously, Samsung reduced the packaging scale for Exynos smartphone application processors at its Cheonan factory, redirecting production capacity to prioritize HBM packaging. Additionally, the company plans to increase the monthly output of 1c DRAM at its P4 facility in Pyeongtaek to 200,000 wafers to support front-end HBM production.

By fully outsourcing the increased production of general modules, Samsung can utilize its limited production facilities more efficiently, ensuring a strong position in the competitive HBM market. This strategy not only reflects the profound transformation of the memory industry in the AI era but also signals that the future supply landscape of the memory market will increasingly tilt toward high value-added products.