Over the past six months, the memory chip market has experienced several price fluctuations. From a stable start at the beginning of the year, to a rapid increase, and then to recent adjustments, each price change has affected the industry's nerves. So, how much has the memory chip price increased in the past six months?
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Institution forecasts and price increase plans of various manufacturers
According to data from TrendForce, in the first quarter of 2024, the contract price of DRAM chips increased by as much as 20%, while NAND flash memory increased by 23% to 28%.
Recently, TrendForce also made the latest forecast for the second quarter of the storage product price. TrendForce said that the price of memory chips may continue to rise, and the second quarter DRAM contract price will be revised to an increase of 13% to 18%; the NAND Flash contract price will be revised to an increase of about 15% to 20%, continuing the strong momentum of the first quarter.
At the same time, major manufacturers have also continuously adjusted their pricing strategies this year.
At the beginning of this year, the China Taiwan Electronics Times reported that Samsung and Micron, two major memory chip manufacturers, planned to increase the price of DRAM chips by 15% to 20% in the first quarter of 2024. The price of NAND products has also fluctuated several times in the first quarter. It is reported that in order to restore the profitability of its memory chip business, Samsung plans to increase the price of NAND flash memory chips by up to 20%. According to Micron's financial report for the second quarter of fiscal year 2024, which ended on February 29, 2024, the average price increase of its NAND Flash in that quarter exceeded 30%.Recently, supply chain news has reported that SK Hynix will increase the prices of its LPDDR5, LPDDR4, NAND, and DDR5 products, with an increase of 15%-20%. It is reported that the prices of Hynix's DRAM products have been adjusted monthly since the fourth quarter of last year, and have accumulated an increase of about 60%-100%, with a slower increase expected in the second half of the year.
In April of this year, Western Digital also issued a price increase notice to suppliers, announcing that it will continue to raise prices for NAND Flash and HDD products this quarter. It is worth noting that in December last year, Western Digital had already issued a price increase notice to customers, emphasizing that the prices of NAND Flash products will adopt a cyclical adjustment method in the next few quarters, with an expected cumulative increase of 55%. Western Digital also pointed out that the company's HDD products will also review pricing on a weekly basis, and it is expected that prices will rise in the first half of 2024. Kioxia's recently released first quarter performance report shows that the price of NAND Flash (calculated in yen) in the first quarter of 2024 increased by 15-19% compared to the fourth quarter of the natural year 2023, marking the third consecutive quarter of increase. If calculated in US dollars, the price increased by about 20% month-on-month. The shipment of NAND Flash increased by 5-9% month-on-month. Next, let's take a look at the specific performance of various storage products in the market.
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Price increase situation of various storage products
With the growth of market demand and the continuation of supply tension, the categories of storage wafer price increases are gradually increasing, and this price pressure has begun to gradually transmit to the finished product end, affecting the cost of the final product.
According to CFM data, as of now, most customers' second quarter contract prices have been successively settled.
Among them, the server market benefits from the AI investment boom, driving a surge in demand for HBM and DDR5. Internet companies are actively replenishing inventory and have a relatively high acceptance of prices.
In terms of enterprise-level NAND, new process products are still in the process of introduction and verification. Due to the long verification cycle of enterprise-level products, coupled with the time required for new process technology to ramp up production capacity, it is expected to be fully introduced and completed by Q4 or even next year. Therefore, the overall supply is in short supply, and terminal customers also expect price increases, with a second quarter increase of 25%-30%, to $0.12/GB.In the server DRAM sector, the transition from DDR4 to DDR5 is an inevitable trend, and the production capacity of DDR4 will gradually decrease. Benefiting from the new demand from AI servers, original manufacturers are actively promoting the rapid ramp-up of DDR5 production capacity, expanding the supply of high-capacity 32Gb DDR5 chips. Combined with the production ramp-up of new processor platforms that support DDR5, under the overall trend of technological iteration and product upgrade in the server side, the penetration rate of DDR5 servers in the second half of the year is expected to exceed 50%. Overall, the price increase of server DRAM in the second quarter is expected to reach 10%-20%.
In contrast, the consumer market represented by PCs and smartphones faces the bottleneck of sales growth and the pressure of component costs, and is extremely sensitive to prices. The contract price of embedded UFS rose by 5%-10% month-on-month to $0.070-0.075/GB; the contract price of LPDDR4X rose by 3%-8% month-on-month to $0.27-0.28/Gb; the contract price of LPDDR5X rose by 0-3% month-on-month to $0.29-0.30/Gb.
In terms of PC applications, under the original manufacturer's capacity adjustment and strong price increase, the top PC terminals can still accept a price increase of 10%-15% for PCSSD, and the price increase of PCDRAM is about 10%, while the NANDASP is mainly between $0.065-0.070/GB.
It can be seen that in terms of price increase, consumer applications are obviously lower than enterprise-level applications. This year, the recovery momentum of the server market is clear, especially driven by AI servers, the demand for high-capacity eSSD and DDR5 inventory increases, and the server-side storage price leads the rise. However, in consumer applications, smartphone and PC manufacturers generally have a certain inventory level, and the continuous rise in prices has significantly reduced the enthusiasm for pulling goods.
Reflected in the price, the following table lists the price increase of several main storage products in the past year:
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Two major driving factors for price increases
The continuous rise in the price of the storage market mainly comes from the supply and demand sides.Firstly, looking from the supply side, the overall storage industry was in a downturn in the first half of 2023. Manufacturers such as Samsung, SK Hynix, Micron, Western Digital, and Kioxia announced capacity cuts, and companies reduced their capital expenditures on storage business. The simultaneous production reduction plans of major manufacturers have led to an early arrival of the storage cycle. With the ever-expanding demand for storage, the prices of storage chips have risen, entering the recovery cycle ahead of schedule.
Secondly, from the demand side, after the continuous weakness in terminal market demand last year, the consumer electronics market is gradually recovering in 2024, and the prices of memory chips have also started to rise. In addition, the popularity of AI phones and AI PCs has also given a certain boost to storage products.
TAI Wei, General Manager of China's Flash Memory Market, pointed out that the average capacity of mobile phones in 2024 will exceed 200GB, and the memory is evolving towards higher performance LPDDR5x. The average capacity of mobile phone DRAM this year is more than 7GB. Looking at the existing storage capacity of AI mobile phones in the market, the vivo X90 series has 8GB and 12GB of memory, with the highest flash memory up to 512GB. The X100 series has increased its memory to 12GB and 16GB, with the highest flash memory up to 1TB. The OPPO Find X7 series and OPPO Find X6 series both have 12GB and 16GB of memory specifications, but the former's flash memory is up to 1TB, while the latter's flash memory is up to 512GB. The Samsung Galaxy S23 series has 8GB of memory, and the Samsung Galaxy S24 series has two specifications of 8GB and 12GB of memory. Overall, both memory and flash memory, the storage capacity of AI mobile phones is increasing.
AI is also a new engine for the personal PC market. AI PCs are embedded with AI chips and support localized AI models, requiring faster data transmission speeds, larger storage capacities, and bandwidth. 32GB LPDDR5x and 1TB PCIe 4.0 SSD will have good applications. Currently, manufacturers such as Intel, Microsoft, Huawei, Lenovo, Dell, and ASUS have released AI PC products. However, AI industry analysts believe that some AI PC products on the market have a gimmick attribute, because the AI functions of PCs are still in the early stages, "a popular disruptive application needs to appear to significantly drive the sales of AI PCs."
Will Q3 prices rise again?
Morgan Stanley's latest research report has raised the expected price increase for DRAM and NAND chips in Q3 this year, from the original expectation of 8% and 10% to 13% and 20%. In this case, the market's expectations for the storage industry have further increased.
Q3 is the traditional peak season for the storage market, as the National Day holiday in mainland China is approaching, as well as shopping events such as Double 11 and Double 12, and Western holidays such as Thanksgiving and Christmas are also coming. Most market merchants have the need to stock up and replenish.
Recently, there has been news in the storage chip industry that general-purpose DRAM memory chips may face a shortage of supply. With the industry's strong investment in high-bandwidth memory (HBM) such as DRAM, the utilization rate of general-purpose DRAM is relatively low, with Samsung and SK Hynix's utilization rates only between 80% and 90%, in stark contrast to the full-speed production of NAND flash memory.Compared to HBM DRAM, general-purpose DRAM refers to memory chips used in mobile phones and PCs. This signal of supply shortage may indicate a rise in the price of DRAM memory chips.
Samsung also plans to continue raising the pricing of storage products in Q3, with an expected increase of 10% to 15%.
Micron Technology, in its latest financial report for the third quarter of fiscal year 2024 (March-May), predicts that prices will continue to rise throughout 2024. In this quarter, Micron's DRAM revenue was $4.7 billion, accounting for 69% of total revenue, with a sequential growth of 13%. DRAM bit shipments decreased by a mid-single-digit percentage, while DRAM ASP increased by about 20% sequentially. NAND revenue was $2.1 billion, accounting for 30% of total revenue, with a sequential growth of 32%. NAND bit shipments increased by a high single-digit percentage, and NAND ASP increased by about 20% sequentially.
However, with the demand in downstream industries such as consumer electronics not fully recovering, this round of price increases is not beneficial to all companies in the industry chain. It is reported that in some niche areas, there is a situation where demand decreases due to the inability to bear the upstream price increases, leading to a reduction in procurement volume. The latest terminal product prices in the table above also show that after May, the selling prices of products such as SSDs and memory sticks have a clear downward trend.
Therefore, there are some different voices in the industry, predicting that the growth momentum of the storage product market in the second half of the year will tend to be flat.
Beijing Junzheng said in a survey at the end of May that the gross profit margin of storage chips was 36.48% last year, and it was also above 36% in the first quarter of this year, with a relatively stable gross profit margin for storage chips. The recent price increase of consumer storage chips is mainly due to the large price reduction of consumer storage chips last year, which has basically reached the limit. Therefore, large factories protect product prices through strategies such as limiting production. We mainly focus on the industry market, and the price of storage chips has never been low, and the possibility of price increase is relatively small. The main growth in the future is expected to come from an increase in volume.
Hui Rong Technology's CAS business group senior vice president Duan Xiting said in late March this year that the growth of flash memory will be slightly flat in the second half of this year, and then the overall growth may continue until the first quarter to the second quarter of next year. There are many variables affecting memory, and it is expected that the growth in the second half of this year may slow down, mainly depending on whether the speed of AI moving to the terminal is fast enough.
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Domestic manufacturers usher in a turning point in performanceAccording to statistics, the Wind Memory Index, which consists of 25 stocks, achieved a total revenue of 145.653 billion yuan in 2023, a year-on-year decrease of 6.52 percentage points; the total net profit attributable to the parent company was 1.443 billion yuan, only 20.40% of that in 2022. In the first quarter of this year, the 25 component stocks achieved a total revenue of 34.202 billion yuan, a year-on-year increase of 8.17%, and a total net profit attributable to the parent company of 1.809 billion yuan, a year-on-year increase of 127.26%.
During the rapid recovery of the industry's prosperity, the performance of many domestic companies has also been significantly improved. According to the first quarter report data, among the 25 component stocks of the memory index, 16 companies achieved a year-on-year increase in revenue in the first quarter of this year, with 9 companies achieving growth of more than 70%. Among them, Biwei Storage's revenue growth reached as high as 305.80%.
In terms of net profit attributable to the parent company, 12 companies achieved a 100% increase in the first quarter, namely Lianqi Technology, Demingli, Puran Shares, Xiechuang Data, Jiangbolong, Biwei Storage, Xingsen Technology, Zhongdian Xingfa, Quanzhi Technology, Wanrun Technology, Huatian Technology, and JuChen Shares. Among them, Lianqi Technology ranked first in the sector with a year-on-year increase of 1032.86% in net profit attributable to the parent company, while Jiangbolong became the most profitable company in the sector with a net profit of 384 million yuan attributable to the parent company.
Corresponding to the performance, the gross profit margin and net profit margin of some companies have also increased to a certain extent. In terms of gross profit margin, the representative company Jiangbolong had a gross profit margin of 24.39% in the first quarter of this year, an increase of 23.12 percentage points year-on-year, an increase of 5.88 percentage points quarter-on-quarter, and an increase of 16.2 percentage points compared to the 2023 annual report figures. In addition, companies such as Tongyou Technology, Biwei Storage, Demingli, and Shanghai Xinyang also saw a good increase in the gross profit margin in the first quarter, both year-on-year and quarter-on-quarter.
After experiencing a highly volatile downcycle in the storage industry, manufacturers in the industry chain are gearing up for the next stage of high growth, especially domestic manufacturers.
According to the latest report from Morgan Stanley, the global memory market will face an unprecedented supply and demand imbalance in 2025. The supply shortage rate of HBM in 2025 will reach 11%, and the supply shortage rate of the entire DRAM market will be as high as 23%. This means that the prices of global storage chips, especially HBM, server DRAM, and ultra-high-density QLC solid-state drives, are expected to rise sharply in 2025.
Therefore, for those domestic companies that have shown strong competitiveness and good performance in the industry, this is undoubtedly an important opportunity. They are expected to take advantage of this market trend to further expand market share and achieve faster development.
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