Currently, supported by the demand of the server market, storage manufacturers are actively switching to high-priced products such as server eSSD, DDR5 and HBM. However, except for AI-related storage products, other types of storage chips, especially the demand in the consumer market, are still weak, resulting in a lack of volume support in the overall storage market.

Driven by demand in areas such as artificial intelligence, high-performance computing and data centers, the HBM (high-bandwidth memory) market will still show significant growth in 2024. Moreover, this growth trend has also driven the growth of NAND demand. The market benefits of these subdivided storage categories will also benefit a number of major storage manufacturers.

According to recent news, Samsung will increase the prices of dynamic random access memory (DRAM) and NAND by 15-20% in the third quarter. Samsung Electronics' performance in the second half of the year is also expected to improve. On June 27, Micron Technology also stated that HBM memory chips in 2024-25 have been sold out, and the supply of memory chips exceeds demand.

Although major storage manufacturers plan to increase HBM production capacity to cope with strong demand growth, it is still difficult to meet market demand in the short term due to complex manufacturing processes. In addition to Micron Technology, SK Hynix has also been rumored to have sold out its HBM production capacity by the end of 2025. Moreover, in order to maintain its monopoly position in the HBM market, SK Hynix has also formed an alliance with TSMC to promote the research and development of HBM4. It is expected that HBM4 will begin mass production in 2026.

It can be seen that the warm wind brought by AI technology to the storage industry will continue for some time and will also become an important support for the future upward cycle of the storage industry.

01 Demand for AI continues to grow

The reason for the rising market price of memory chips is undoubtedly the booming demand for generative artificial intelligence (AI), especially the strong demand for high-bandwidth memory (HBM) in cloud-based high-performance AI chips. In addition, rising demand for AI servers and mobile applications is further driving the growth of the HBM market.

According to TrendForce data and forecasts, the demand for HBM3 from 2022 to 2024 will account for 8%/39%/60% respectively. With its excellent performance, HBM3 will make ASP significantly higher than the previous version, which may further promote the HBM market size to reach 2024. US$16.9 billion, a year-on-year increase of 288%.

Goldman Sachs predicts that the global HBM market size will grow at a compound annual growth rate of approximately 100% during 2023-2026, reaching US$30 billion in 2026.

UBS's previous report also pointed out that HBM demand in 2024 and 2025 will be increased by 1.9% and 8.7% respectively, while HBM3E 12Hi demand in 2025 will account for 58% of the total industry demand, and NVIDIA will account for 50% of the total HBM consumption in 2024 and 2025. 47%, 43%. Overall, HBM will also squeeze the supply of DDR and promote the upcycle of DRAM before the fourth quarter of next year.

On June 26, local time, memory chip manufacturer Micron Technology released its financial report for the third fiscal quarter of fiscal year 2024 as of May 30. According to the financial report, Micron's total revenue in the third fiscal quarter was US$6.81 billion, a year-on-year increase of 81.6% from US$3.75 billion in the same period last year, exceeding FactSet's expectations of US$6.67 billion.

From a specific business point of view, Micron's DRAM revenue in the third fiscal quarter increased by 13% month-on-month to $4.7 billion, in line with market expectations; NAND Flash revenue increased by 32% month-on-month to $2.1 billion, higher than FactSet's expected $1.9 billion. Dollar.

Micron CEO Sanjay Mehrotra also said, "In terms of data centers, the rapidly growing AI demand has increased our revenue by more than 50% compared with the previous quarter."

Regarding expectations for fiscal year 2025, Mehrotra said: “Looking forward to 2025, the demand for AI PCs and AI mobile phones, as well as the continued growth of AI in data centers, provide us with a favorable layout and give us the confidence to achieve success in fiscal year 2025. "Significant revenue growth and improved profitability as we continue to shift to our highest-margin product portfolio."

02 HBM supply and demand imbalance

From the supply side, many major storage manufacturers such as SK Hynix and Samsung are currently working to expand HBM production, planning to increase HBM production by 2.5 times. Micron Technology is also taking various measures to address the imbalance between supply and demand of HBM memory chips in 2024-25. First, Micron Technology is building HBM test production lines and mass production lines in the United States, and is considering producing HBM in Malaysia for the first time to increase production capacity. In addition, Micron Technology plans to more than double its HBM market share to around 20% in 2025.

From the demand side, Nvidia plans to launch a number of new products such as B100, B200 and GB200 in the fourth quarter of 2024, and will continue to launch more high-performance GPUs such as Blackwell Ultra and Rubin GPU in the next few years. These new products have huge demand for high-bandwidth memory (HBM) because they need to process large amounts of data and complex computing tasks.

From a technical perspective, HBM technology will see new breakthroughs in 2024, especially the launch of HBM3 and HBM3e. These new technologies have been widely used in application scenarios such as AI servers, driving the growth of market demand. However, as a high-performance DRAM based on 3D stacking technology, HBM has broken the bottleneck of memory bandwidth and power consumption and promoted the improvement of GPU performance, but the complex packaging stack of HBM products has also affected the yield rate, further exacerbating the situation of supply exceeding demand.

Therefore, overall, the balance between HBM supply and demand is still difficult to achieve in the short term.

Morgan Stanley has previously predicted that memory will usher in a new round of "super cycle", and the pricing power advantage of the memory industry will be further highlighted. The rapid development of AI will lead to an imbalance in the supply and demand of DRAM and HBM. It is expected that the supply shortage rate of HBM will be -11% in 2025, and the supply shortage rate of the entire DRAM market will be -23%. In particular, the demand for HBM will increase significantly, which may account for 30% of the total DRAM supply.

A person in the semiconductor industry revealed that "customers usually only provide demand forecasts for the next quarter, but now they are beginning to provide semiconductor companies with full-year plans, which shows that they attach great importance to ensuring supply. Since it is currently a seller's market, the final negotiated price may exceed a 15% increase."

03 AI market spreads to NAND

It is worth noting that the favorable market for memory chips has spread from DRAM to NAND. It is reported that Samsung Electronics and SK Hynix have increased the operating rate of NAND factories from 20-30% last year to more than 70%. Another major memory manufacturer, Kioxia, has increased the production line operating rate of its two NAND flash memory factories to 100%, ending a 20-month production cut since October 2022.

At the same time, Samsung Electronics has also raised the price of enterprise-level NAND flash memory by more than 20% in the second quarter. As the AI boom further drives up server demand in the second half of the year, memory chip prices are expected to continue to rise.

According to data from market research firm DRAM Exchange, global enterprise-level NAND flash memory sales reached US$3.758 billion in the first quarter of this year, a month-on-month increase of 62.9%. The increase in demand has led to a shortage of supply of some products, and customers are increasingly scrambling to ensure supply.

In addition to storage original factories, semiconductor material suppliers have also felt the warm wind from AI demand and have stepped into the pace of expansion.

According to data from FNGuide, a South Korean financial information service agency, Soulbrain, Wonik Materials, TEMC and other South Korean semiconductor material suppliers have raised their earnings forecasts. Among them, Soulbrain expects operating profit in the second quarter to increase by 22% year-on-year, while Wonik Materials and TEMC predict that operating profit in the second quarter will increase by 200% and 40% respectively compared with the same period last year.

At present, supported by the demand of the server market, storage original manufacturers are actively switching to high-priced products such as server eSSD, DDR5 and HBM. However, in addition to AI concept-related storage products, other categories of storage chips, especially the demand in the consumer market, are still weak, making the overall storage market lack of volume support.

CFM Flash Market pointed out that the recovery of the consumer market is uneven, and the sales of brands are growing and shrinking. More importantly, the terminal generally holds a certain amount of safety inventory as a buffer. Micron Technology also mentioned this point recently, that is, there is uncertainty in industrial and retail demand.

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