The birth of "Super Disc"! Storage, is it eye-catching or money-attracting?

Author / Baked buns under the stars

Edit/Spinach's Starry Sky

Typesetting/Leeks under the stars

At the beginning of the Year of the Dragon, a major event occurred in the storage market that once again ignited the enthusiasm of investors.

In cooperation with scientific research institutions such as the University of Shanghai for Science and Technology, the research team of Shanghai Institute of Optics and Mechanics has achieved petabytes of ultra-large capacity optical storage (1 PB is equivalent to 1 million GB) for the first time after sitting on the cold bench for 7 years. Figuratively speaking, it's the equivalent of shrinking a data center cabinet to a single disc.

A physical photo of the Super Disc

This will undoubtedly play a pivotal role in the future breakthrough of core technologies in the field of storage and taking the lead in industrialization. After all, in the era of artificial intelligence, data is massive, and storage is the cornerstone of all intelligence.

And if you stand at a certain height to look down on the storage market, after a downward cycle of almost two years, there are finally signs of recovery from the cold winter. Whether it is from the price of the product or the performance of the players, it seems to tell us that the industry has reached an inflection point.

But is this really the case? Is the storage market a good investment target at present? The author will take you to find out today.

First, the tide of price increases is coming

Just as the brain needs to remember, information needs to be stored. It is no exaggeration to say that the memory module market is a huge market, which can be divided into two categories: volatile memory (memory module) and non-volatile memory (external memory module, mainly flash memory) according to different memory chips.

Storage industry chain

But no matter what kind of storage module it is, the key words in the past six months are undoubtedly the same: rise, rise, rise.

The contrast between last year and this year is stark. Last year, the global memory module market fell by about 37%, becoming the largest segment of the semiconductor market, mainly due to sluggish demand in end markets (smartphones, PCs) and so on. Against this backdrop, leading players such as Samsung and SK hynix have taken a series of measures, such as cutting capital expenditures and reducing wafer production capacity, in an attempt to reverse the downward trend of the industry.

For example, SK hynix's capital expenditure last year decreased by 50% year-on-year to 9.5 trillion won, and the NAND production cut will continue until at least June this year.

When the head player roars, the earth will tremble three times, and this measure is undoubtedly effective. Taking DRAM products as an example, although its contract price has fallen for eight consecutive quarters since the fourth quarter of 2021, the so-called price of DRAM products finally began to recover in the third quarter of last year, rising by more than 13% quarter-on-quarter in the fourth quarter.

Prediction of memory chip price increases

And according to the predictions of professional institutions, this rally is also expected to continue throughout this year. This year, the year-on-year growth of the storage market is expected to reach 66%, ranking first in all segments of semiconductors. At the same time, the emergence of smart cars, AI large models and other scenarios will also give rise to more storage requirements.

The transformation from a poor student to an excellent student may be less than a year. The reduction of industry production capacity can be said to be the fundamental reason for the rise in memory chip prices, and the stimulation of demand has not been fully reflected, which also makes many investors have faint worries.

Second, what is behind the performance

Friends who know the storage industry should know that storage module players can be divided into IDM manufacturers and third-party module suppliers, the former mainly covering the bulk market (such as dominating the global DRAM module market, with a market share of nearly 90%), and the latter mainly anchoring the needs of some long-tail markets.

DRAM module competitive landscape

From the perspective of industry competition, this industry is basically monopolized by the three major foreign giants (Samsung Electronics, SK hynix and Micron), and domestic players are mainly distributed in the upstream (raw materials, equipment) and midstream (chip manufacturing, packaging and testing) links of the industrial chain.

With the rise in products that began in the third quarter of last year, the performance of domestic players has also seen an inflection point. For example, BIWIN Storage (688525), which accounts for more than ninety percent of the revenue of storage products, as one of the few domestic storage manufacturers integrating R&D, packaging and testing, saw a year-on-year increase of more than 80% in operating income in the fourth quarter of last year, a quarter-on-quarter increase of more than 50%, and a quarter-on-quarter increase of 13% in gross profit margin.

However, it should be noted that BIWIN Storage is expected to achieve an attributable net profit of -550 million to -650 million yuan last year, and there will be a huge loss in the second year of listing, and the losses of last year have exceeded the sum of the net profits from 2019 to 2022, returning to the pre-liberation period overnight, and last year's R&D expenses have increased by 73 million yuan, which can be said to be a game of "burning money".

In fact, on the whole, the significant decline in the performance of BIWIN Storage is by no means an exception, such as GigaDevice (603986) net profit attributable to the parent fell by more than 90% last year, and the net profit attributable to the parent of Puran shares (688766) is expected to decline by 29%-41% year-on-year. Of course, the top players are also doomed, and Samsung Storage and Hynix have all suffered significant losses. Last year, Samsung Electronics' operating profit fell 85% year-on-year to 6.57 trillion won, and don't forget, this is the first time since 2009 that Samsung Electronics' profit has fallen below 10 trillion won.

Behind the decline in performance, it can be reflected that the storage market is actually highly dependent on the terminal market, especially consumer electronics, when the demand of the terminal market declines, it directly affects the company's performance. Moreover, the voice of storage players is not so strong, which makes it easier to compete for market share on price.

3. The vane of semiconductors

Essentially, the storage market is arguably the most standardized segment of the semiconductor family, so it has a significant cyclical nature and is often regarded as the vane of the semiconductor industry.

There is no doubt that the storage market is currently at a moment where it is just creeping out of the bottom. It can be said that the pulling force from the demand side is less than the effect of production reduction by upstream players, and the production reduction is to survive better.

However, whether players can continue to eat and drink spicy food in the future, whether downstream terminal demand can form continuous support, and macroeconomic recovery are the questions we need to think about.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.