SK Hynix Expansion Spooks Micron, But New Capacity Won't Quench Near-Term Demand Fire

Micron (MU-US) fell 3.6% to $849.80 in Friday morning trading, as markets briefly worried that its South Korean rival SK Hynix (SKHY-US) might accelerate a reversal in memory supply-demand dynamics through aggressive capacity expansion. However, Barron’s argues that since semiconductor fabs take years to build and ramp up, SK Hynix’s investment won’t increase market supply in the short term and is unlikely to pose a long-term threat to Micron.

Micron’s stock has declined 10% over the past month but remains up more than 600% over the past 12 months. With artificial intelligence (AI) hardware driving soaring memory demand, investors are closely watching when supply will catch up with demand and how long the current memory price-up cycle can last.

On Friday, SK Hynix announced that its board approved an investment of 54.3 trillion Korean won (approximately $38.15 billion) to build a new chip manufacturing facility in South Korea. While the amount is substantial, the market was already aware of even larger expansion plans. In June, SK Hynix and Samsung Electronics jointly announced they would invest a combined 800 trillion won (about $518.58 billion) to create a new semiconductor manufacturing cluster in southwestern South Korea.

Large-scale wafer fabs typically take several years to complete. Micron itself announced a $100 billion chip plant investment in New York State back in 2022, but production isn’t expected to begin until 2030. Barron’s notes that no new large-scale memory capacity will enter the market within the next year, with additional output only gradually coming online starting in 2028.

This means tight memory supply conditions are unlikely to ease in the short term, and prices could continue rising over the next few years. UBS analysts estimate memory prices will rise over 200% this year, with another 89% increase projected by 2027.

UBS economist Arend Kapteyn points out that about 60% of incremental AI capital expenditure in 2026 will go toward higher memory prices; by 2027, that figure could reach as high as 97%. Therefore, while SK Hynix’s aggressive expansion has caused short-term volatility in memory stocks, it won’t immediately alter the fundamental imbalance of supply falling short of demand. SK Hynix’s American Depositary Receipts fell 6.2% on Friday, while its shares listed in South Korea closed down 4.9%.