Japanese equipment manufacturers are ramping up their investments in South Korea, targeting the burgeoning High-Bandwidth Memory (HBM) market. This move comes amid fluctuating demand forecasts and concerns about potential overinvestment.

Last March, SK Hynix achieved a milestone by mass-producing the world’s first 8-layer HBM product, capable of processing 1.2TB of data per second. This technological advancement has positioned South Korean companies, including Samsung Electronics and SK Hynix, at the forefront of the HBM market, which they currently dominate with a 90% share.

According to industry sources on September 20, the Nihon Keizai Shimbun (Nikkei) reported that Japanese semiconductor equipment manufacturers are actively pursuing supply contracts with South Korean HBM companies. Tokyo Electron (TEL) is constructing its fourth R&D center in Yongin, Gyeonggi Province, set to commence operations in 2026. Towa is expanding its HBM molding equipment manufacturing facility in Cheonan’s 3rd Industrial Complex, with completion expected by March 2025. Disco is also increasing its recruitment efforts in South Korea to meet the rising demand.

Initially, the industry predicted that HBM demand would reach 220 billion gigabits (Gb) next year, significantly exceeding this year’s estimated 120 billion Gb. However, recent forecasts have adjusted this figure downward to around 150 billion Gb, raising concerns about overinvestment. Big tech companies, which previously emphasized that “underinvestment is much more dangerous than overinvestment,” are now questioning whether “demand has been excessively inflated.”

Despite these concerns, Japanese equipment manufacturers’ increased investments in South Korea reflect a belief in the steady growth of HBM demand. An official from the Japanese equipment industry explained to Nikkei, “The memory market is volatile, but HBM is expected to grow,” highlighting the rationale behind their strategic moves.

HBM, a type of DRAM memory selected by Nvidia for AI semiconductors, is crucial for advanced computing applications due to its high data transfer speeds and efficiency. The high manufacturing difficulty and contract-based nature of HBM production reduce the likelihood of an oversupply. Hwang Min-seong, an analyst at Samsung Securities, noted, “If SK Hynix were concerned about an economic downturn, they would prioritize improving their financial situation,” adding, “While there are concerns about a large-scale oversupply, the likelihood is not high.”

Market research firm TrendForce echoed this sentiment, stating, “The scale of AI investments by major technology companies, which is the driving force behind HBM demand, has been underestimated,” and “The overall average selling price of DRAM is expected to rise until 2025 due to the increased penetration of HBM.”

Gartner predicts that HBM sales will grow more than sixfold over the next five years (2023-2027), underscoring the long-term growth potential of this technology. SK Hynix is set to start mass production of its 12-layer HBM3E, a high-performance memory product for AI, in the third quarter, further solidifying its position in the market.

South Korea’s semiconductor equipment self-sufficiency rate is currently only about 20%, making the investments by Japanese manufacturers even more critical. These strategic moves are expected to bolster South Korea’s capabilities and support the anticipated growth in HBM demand.