American memory chip-maker Micron has announced its plan to infuse an investment of more than $150 billion in cutting-edge memory manufacturing and research and development (R&D) globally over the next ten years. 

With the increased memory requirements in gaming, automotive, healthcare, telecommunication, and more importantly, with the growth drivers like 5G and AI, the global semiconductor memory market was valued at USD110.30 billion in 2020. Moreover, it is expected to register a growth at a CAGR of around 7.02 per cent by 2026, as per the industry report.

The company says that the investment will help meet the growing demand for memory, which is essential for all computing. 

Amid the global chip crisis, not just Micron but chip companies worldwide are planning facility expansions. After announcing expansion plans in the United States earlier this year, Intel Corp. vowed up to $95 billion for expanded chip-making capacity in Europe. The world’s largest contract chip manufacturer, Taiwan Semiconductor Manufacturing Co., has also announced that it would develop the first chip manufacturing plant in Japan. Moreover, Samsung Electronics Co. and GlobalFoundries Inc. both revealed capital investment intentions.

The investment plan seems to be towards capturing a good market share and leading the race when it comes to the chip manufacturing domain. However, the bigger question remains — where will the money for such a huge investment come from? So let’s dive deep into the issue.

Decoding the spending

The top 10 R & D spenders when it comes to semiconductors are Intel, followed by Samsung, Broadcom, Qualcomm, Nvidia, TSMC, MediaTek, Micron, SK Hynix, and AMD, as per the McClean report and IC insights. These ten firms collectively increased their research and development expenditures by 11% in 2020 to $43.5 billion, which amounts to 64% of the industry’s total. Micron stands eighth in the row.

It is important to note that Intel, with 19% of the industry’s total R & D spending alone, contributed an estimated $12.9 billion in 2020. With the second rank, Samsung has increased its R & D spending by 19% to $5.6 billion in 2020, owing to the South Korean memory giant’s increased development of some of the leading-edge logic processes (of 5nm and below) to compete in the advanced IC foundry business. Taiwan Semiconductor Manufacturing Co., at the third position, increased its R & D spending by 24% to nearly $3.7 billion last year. Hence, it will be interesting to look at how many fold Micron is going to pump up its yearly investment to achieve $150 billion in the next ten years. 

Micron has benefited from a surge in memory chip prices caused by the COVID-19 epidemic, as seen by its full-year earnings reported in September 2021. Annual revenues increased to $27.71 billion from $21.44 billion – a 29% growth over the year before, while GAAP profit more than doubled to $5.86 billion from $2.69 billion. However, analysts and experts feel the party is over, particularly for DRAM, or dynamic random access memory, which is often found in personal computers and larger systems like servers, as reported by MarketWatch. Analysts predict that if the surge in PC sales slows, the price hikes will also go down in the coming years.

Additionally, it can be said that the announcement must have been made after taking due consideration; however, the roadmap to achieve the same level of investment as promised needs to be unveiled. 

The plan to infuse $150 billion will surely be a win-win situation for the semiconductor industry as a whole. Moreover, Micron holds solid ground when it comes to DRAM, NAND, NOR memory and storage products. As the global data economy is bound to see a surge in growth, the need for memory will definitely increase. Hence, if implemented fairly, the announcement will not only help Micron strengthen its position but is likely going to be a timely step to ward off the memory crisis.