Up to now, the price of memory chips has been rising for nearly 8 months.

From an end-user perspective, SSD (solid hard drive) prices have begun to increase since the third quarter of last year. Some electronic product enthusiasts even said that a 4TB SSD purchased on June 18 last year can now be resold for a net profit of 500 yuan.

From the perspective of the chip supply chain, according to flash memory market data, the price of Flash Wafer (flash memory wafer) reached a new high at the end of February.

This wave of price increases is mainly led by the three memory chip giants Samsung, Micron, and SK Hynix. Since SK Hynix officially announced a 10%-20% increase in DRAM and NAND Flash chip contract prices in October last year, Samsung and Micron also stated in January this year that they would increase the price of DRAM chips by 15%-20% in the first quarter. .

It is worth noting that the total market share of the three memory chip giants is as high as 95%, which also means that the entire storage market is in a state of rising prices.

01 While reducing production, raising prices at the same time

It is understood that the reasons for the price increase mainly come from two aspects. One is the recovery of terminal demand, and the other is the production reduction strategy of the giants that has lasted for more than a year.

According to data from research firm TrendForce, global NAND Flash industry revenue reached US$11.49 billion in the fourth quarter of 2023, a quarterly increase of 24.5%. This growth was mainly due to the recovery of terminal demand due to year-end promotions and the expansion of orders in the parts market. Memory chip shipments increased significantly year-on-year.

In recent years, the demand for large model training in the cloud has also led to an explosion of demand for HBM (storage chips that are compatible with high-performance computing, mainly used in CPU/GPU) in data centers. Micron, one of the Big Three, recently revealed in an earnings call that all its HBM products have been sold out and most of its production capacity in 2025 has been booked.

On the other hand, judging from the situation of the three giants, the price increase has a lot to do with their production reduction strategy in the past year or so.

After all, before the price increase, memory chips had almost fallen to cost price.

Starting in 2022, memory chip prices will begin to fall due to oversupply. In the second half of 2022, the prices of DRAM and NAND Flash will be halved compared to the beginning of the year. This situation has not improved in the first half of 2023, with Samsung's NAND Flash almost approaching cost price.

Therefore, the three giants have tacitly chosen to reduce production and cut orders in 2023.

In the first half of 2023, Samsung's DRAM chip production decreased by 20%, and NAND flash memory chip production decreased by 30%. There is even news that its production reduction will reach 50% by the end of 2023.

Kim Woo-hyun, chief financial officer of SK Hynix, said at the financial report conference at the end of July 2023: "The inventory level of NAND is very high, and production will be further reduced by 5% to 10%."

Manish Bhatia, vice president of Micron Technology, also said: "The reduction in wafer investment will be close to 30%," clarifying the policy for further production reductions.

So after experiencing price cuts and production cuts, the storage market finally ushered in a price increase.

In May 2023, Samsung and Micron issued notices to dealers that they would no longer accept orders for DRAM and NAND Flash at low prices, and refused to accept quotes lower than those in April. Until around June, it was reported that after Yangtze Memory's original flash memory officially began to increase prices by 3-5%, Samsung Electronics, SK Hynix, etc. also gradually considered increasing their quotations.

There is also news that the three giants have officially announced price increases of nearly 20% in October last year and January this year.

News of price increases are released frequently, giving the storage market a long-awaited dawn.

02 "It is expected to increase until early next year"

The industry generally believes that price increases in the storage market will continue for a long time.

According to CFM flash memory market data, Flash prices are still rising slightly since 2024. The price of 512Gb TLC Flash Wafer has increased by 13% year-to-date. DRAM has also returned to the price level at the beginning of last year. DDR4 16Gb 3200 has increased by 10% year-to-date. You can also see from the figure below that the price of memory chips has been on an upward trend for a long time.

Moreover, amid the overall increase in original factory prices, South Korea, which is home to two major memory giants, Samsung and SK Hynix, also saw a year-on-year increase of 66.7% in semiconductor exports to US$9.9 billion in February, the highest value in nearly 76 months. It increased by 5.8% from January, increasing for four consecutive months. Among them, the export value of memory chips was US$6.01 billion, a year-on-year increase of 108.1% and a month-on-month increase of 14%. Other data show that South Korea's SSD exports increased by 18.4% year-on-year in February, which mainly benefited from rising storage prices.

In addition, TechInsights statistics show that in the week ending February 16, 2024, DRAM sales increased by 79% year-on-year. It is expected that global DRAM chip sales will increase by 46% in 2024, reaching US$78 billion.

Visible to the naked eye, the storage market has ushered in its second spring. And many parties are saying that price increases will continue for a long time.

For example, module manufacturer Longsys pointed out in the announcement that starting from the end of the third quarter of 2023, measures such as production reduction and capital expenditure reduction taken by international storage manufacturers have achieved significant results. At the same time, due to the decline in unit costs, more terminal consumer demand has been stimulated , especially with the gradual recovery of major storage application markets such as mobile phones and PCs, the storage industry has begun to exit the downward cycle, market demand has recovered, and mainstream memory prices continue to rise.

Tianfeng Securities recently pointed out that the NAND price index has increased by about 80% since hitting bottom in August 2023, and the DRAM price index has also increased by more than 30% relative to the bottom. Storage plants have benefited from product price increases, and the sector's gross profit margin and net profit margin are expected to Interest rates will continue to increase quarter-on-quarter in the first quarter of 2024, fulfilling the logic of previous product price increases.

Gou Jiazhang, the general manager of Huirong Technology, a storage main control chip supplier, said this year that the price of NAND Flash in the second quarter has been negotiated and is expected to increase by 20%. After the second quarter, the price will increase. Most suppliers start making money. The earliest time for NAND Flash production to increase will be after the second half of this year. It is expected that this wave of price increases will also be maintained in the first half of 2025, and the overall continued upward trend is expected to last for two years.

03 Storage price increases are igniting the main control chip market

The recovery of memory chips has also brought confidence to the entire industry chain, especially SSD main control chips for PCs and UFS main control chips for mobile phones.

Different from the memory chip, the role of the main control chip is to manage the usage of the memory chip, including reasonably allocating the load of data on each flash memory chip, temperature management, SMART health reporting, bad block management and other tasks. It also needs to implement error correction. , as well as power-off protection and other functions.

Global main control chip manufacturers are mainly divided into two categories: the first type is self-developed and self-used SSD main control chip manufacturers, which mainly use self-developed SSD main control chips to sell SSD modules to downstream customers. Manufacturers include NAND such as Samsung Flash original factory and Phison Electronics; the second category is independent solid-state drive main control chip manufacturers, which mainly sell SSD main control chips and solutions to downstream customers. Manufacturers include Huirong Technology, Yingren Technology, Lianyun Technology, Marvell, and Ruiyun Technology Yu, get a little wait.

Driven by the recovery of the memory chip market, there is also a lot of good news in the main control chip industry. Judging from the performance of listed companies, benefiting from the recovery of the storage market, main control chip companies are also "eating meat and drinking soup":

In the fourth quarter of 2023, Huirong's revenue surged to US$223.8 million, a 17% month-on-month increase and a year-on-year increase of 1%; the gross profit margin was 44.1%, and the after-tax net profit was US$31.32 million. In terms of Huirong's product line in this quarter, SSD main control chips increased by 15% to 20%, and eMMC/UFS main control chips increased by 25% to 30%. Duan Xiting, senior vice president of Huirong's CAS (terminal and automotive storage) business group, also said that Huirong's growth in the fourth quarter mainly came from demand recovery.

Phison, the leading NAND memory chip company, announced data on February 7 that its consolidated revenue in January 2024 was NT$5.086 billion, a year-on-year increase of more than 75%, the second highest in the same period in history. In addition, SSD main control chip shipments increased by 37% in January, also achieving the second-highest level in the same period in history. Among them, PCIe SSD main control chip shipments increased by 75% year-on-year, setting a new record.

In the context of industry recovery, many companies have also begun to make cutting-edge layouts and have recently released new products, such as Huirong and Yingren.

Facing the AI mobile phone market, Huirong recently released the new UFS 4.0 main control chip SM2756. It is understood that the SM2756 has a sequential read performance of more than 4,300 MB/s, a sequential write speed of more than 4,000 MB/s, and supports the widest range of 3-TLC methods and QLC NAND flash memory with a capacity of up to 2TB, which can meet the needs of large end-side models. data access requirements.

For the PC market, Yingren Technology, which is also a third-party SSD independent main control manufacturer, recently released the PCIe Gen5 main control chip YRS820, which can be applied in high-end consumer markets including AI PCs. It is understood that this product is based on RISC-V architecture. In terms of performance, YRS820 can achieve sequential reading of 14GB/s, sequential writing of 12GB/s, random reading and random writing of up to 2000K IOPs and 1500K IOPs respectively. It can upgrade game performance, accelerate data processing, and support data encryption and decryption.

It is not difficult to see from the performance and applications of new products that AI has now become a must-have option, and AI will also become a necessary element to ensure the continued growth of the storage market.

In the future, in addition to the demand for cloud-based AI training, more HBM-related orders will be brought about. In terms of PCs and mobile phones, based on consumer demand for privacy and personalization, large-scale end-side models will also create a large amount of storage and flash memory requirements.

The difference is that large end-side models have very high requirements for memory chips. After all, mobile phones cannot use HBM because the cost is too high. Therefore, under such challenges, large models are also constantly being lightweighted, making PCs and mobile phones High-end memory chips can also run a high-quality large model locally.

In the future, with the application of large-scale models on PCs and mobile phones, it will also bring new vitality to the SSD and UFS industries, and may bring another upward cycle to memory chip and main control chip manufacturers.

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