In the past two years, the memory chip industry has entered an adjustment cycle, and memory chip companies are facing various problems such as excess inventory chips, reduced customer orders, and plummeting prices. In 2022, DRAM (memory) prices fell from the beginning of the year to the end of the year, and according to TrendForce's survey, contract prices fell by more than 10% every quarter in the second half of the year.
On the product side, the prices of storage products such as SSDs have been significantly affected, whether it is those well-known brands or low-end brands, product prices have ushered in a dive, and this situation has continued until the end of 2023 to usher in a reversal.
In fact, memory chip companies have not experienced the downward cycle of the industry. The last time the industry was in a downward cycle was in 2007, when Microsoft's Vista system put forward a greater demand for memory, and major storage manufacturers expanded production as a result. But then the failure of Vista led to oversupply, DRAM prices followed the laws of the market, and the outbreak of the global financial crisis in 2008 caused market prices to fall below the cost of materials, completely changing the industry landscape.
Every industry faces cyclical ups and downs, but after each downcycle, it also creates new opportunities for the industry. The concentrated explosion of the concept of AI has ushered in a wave of upward trend in the DRAM market.
AI has brought new increments to storage, and the storage industry has bottomed out
According to TrendForce, in the fourth quarter of 2023, the total revenue of the global DRAM industry reached $17.46 billion, up 29.6% year-on-year. Samsung Electronics, SK hynix, Longsys, Micron, PSMC and other well-known manufacturers have achieved positive revenue growth, and the increase is generally large, among which Longsys achieved operating income of more than 10 billion yuan for the first time, with a year-on-year increase of 21.55%, while PSMC increased by an astonishing 110%.
Source: Weibo
After two consecutive years of decline, the storage market is finally back on track, and the prices of related products are on a steady upward trend. Supply chain sources broke the news that SK hynix plans to raise the prices of its LPDDR5, LPDDR4, NAND, DDR5 and other products, with an increase of about 15%-20%. Since the fourth quarter of last year, SK hynix's DRAM product prices have risen by about 60%-100%.
The price increase of storage is a microcosm of the current industry, and the essence behind it is still the relationship between market supply and demand.
The emergence of large AI models such as ChatGPT, Sora, and Suno has not only refreshed people's perception of artificial intelligence, but also made large models a new hot spot for consumer electronics. Large models at home and abroad are constantly emerging, and they have almost unlimited demand for computing power and data, giving rise to massive storage needs.
From the perspective of the application market, mobile phones, PCs, and servers are still the three main application markets for storage, but unlike in the past, under the requirements of generative AI technology, the demand for DRAM and NAND (flash memory) for AI terminals such as AI mobile phones, AI PCs, and AI servers has increased dramatically. As market demand increases, it is not surprising that prices have risen.
However, in Xiaolei's view, the storage industry has bottomed out from the recession in 2022 to the end of 2023, relying on more than just the new increment of the market demand side, and the manufacturers' active "self-help" has played a big role.
Seize the growth point of AI, and storage manufacturers have their own powers
At a time when AI demand is leading the market development, the market urgently needs high-tech memory products, which also provides more development opportunities for many storage manufacturers.
Samsung Electronics has adopted an aggressive price reduction strategy in the price war in the downward cycle, and the demand has increased instead of decreasing, although the overall revenue has not been able to avoid the decline, but the decline is the least in the industry. In addition to shipments, Samsung Electronics plans to launch new products using UFS 4.0 4 technology in response to the demand for mobile AI deployment. Compared with UFS 2.2 and 3.1, the new technology has better performance in terms of power efficiency and transmission speed, and is more in line with the needs of mobile AI large models.
According to Samsung Semiconductor, it will actively participate in the development of UFS 5.0 in the future, which means that the efficiency of mobile large model loading and operation will be further improved in the future, which is also one of the key factors affecting procurement for brands that attach great importance to the experience of mobile devices.
On the PC side, Samsung Electronics predicts that SSD products on the PC side will enter the PCIe 5.0 era, and for this reason, Samsung Electronics has launched PCIe 5.0 compatible storage products to solve the PC load caused by large amounts of data transmission in the AI era.
Source: Samsung Electronics China official website
On the other hand, SK hynix also achieved revenue growth at the end of 2023 by virtue of the price advantage of HBM and DDR5, as well as the profitability of high-capacity server DRAM modules. At this stage, SK hynix's main direction is to expand HBM production capacity and accelerate the pace of advanced process development and mass production.
Looking back at the development of process nodes, we can find that SK hynix has gone from 1X, 1Y, and 1Z to the more advanced 1α, 1β, and 1γ, and the iteration cycle of the process process is about 1-2 years, and there are even signs of accelerating the pace in recent years. Not only SK hynix, but also other memory manufacturers such as Micron and Samsung Electronics, from the perspective of the general direction of the industry, it is the general trend for storage manufacturers to accelerate the pace of chasing new process technology.
In response to the new demand for AI on devices, SK hynix announced the development of ZUFS 4.0, a mobile NAND flash memory solution product, which is scheduled to start mass production in the third quarter of this year. According to the official introduction, this is a new product based on mobile phones, digital cameras and other electronic products to create universal flash storage (UFS) to improve the efficiency of data management. There is no doubt that ZUFS 4.0 is aimed at smartphones equipped with device-side AI, and if it can effectively improve the storage and write efficiency and improve the running experience of device-side large models, then it is indeed a storage product worth considering for AI mobile phones.
Compared with overseas memory chip companies, domestic memory track players have taken a different path. As one of the few enterprises in China with "eSSD+RDIMM" product design, combination and continuous supply capabilities, Longsys chose to start from the service model, and launched the TCM model while balancing efficiency and cost, that is, integrating the three links of technology, contract and manufacturing to provide customers with customized and competitive storage products, solutions and personalized services.
Through the acquisition of Yuancheng Suzhou and Zhiyi Brazil's Zilia, Longsys has completely laid out the memory chip packaging testing and development business, including integrated packaging design, firmware algorithm development, and memory chip testing.
Source: Long Bo
On the product side, Longsys tried its hand at the knife. At the 2024 CFMS China Flash Memory Market Summit, six new storage products were launched, including the Lexar 1TB NM Card, Lexar 2TB microSD, FORESEE QLC eMMC, FORESEE CXL 2.0 memory module and FORESEE LPCAMM2, achieving a balance between speed, capacity, packaging and cost.
The adjustment of product concept and business model, we may not be able to feel clearly, but the financial report data will not deceive, Longsys' first quarter report in 2024 shows that the company's main revenue increased by 200.54% year-on-year; The net profit attributable to the parent company increased by 236.93% year-on-year. The increase in revenue and net profit reflects Longsys' strong profitability in the market competition.
Longsys wants to transform from a memory module factory to a comprehensive semiconductor storage brand, which may not be far from realization.
Will the price of storage go up?
Since the beginning of 2024, the price of DRAM memory chips has continued to rise. TrendForce predicts that global DRAM chip sales will increase by 46% to $78 billion in 2024. In the second quarter of this year, HBM price negotiations for 2025 have begun, and suppliers have initially increased by 5%-10% due to the limited total DRAM capacity.
One of the main reasons is that HBM buyers are very optimistic about the outlook for AI demand and are willing to accept price increases. Previously, the CEO of SK hynix said that the company's HBM production capacity in 2024 has been snapped up by customers, and the HBM products produced in 2025 are basically sold out according to the mass production plan, which shows the strong demand brought by the outbreak of AI.
Source: Samsung
According to the current form of the storage industry, memory chip companies that have been silent for two years will inevitably not let go of the new increments brought by AI, and improving production capacity and accelerating iteration will be the main line of development of the storage industry in the next few years. The rise of AI large models has promoted AI-related terminal applications to become the support for the storage uplink cycle, and the landing progress of AI terminals has affected the future trend of the storage industry.
At present, the storage capacity demand of AI mobile phones, AI PCs, and even automotive terminals is constantly expanding. When the storage technology cannot meet the requirements of AI terminals, or the progress of AI terminals cannot keep up with the iteration pace of storage technology, the lag of either party's progress will affect the future trend of the other party.
Xiaolei believes that the two sides are like a temporary community of destiny, and only when they cooperate well can they enjoy industry opportunities together. As long as AI terminals can bring better landing applications to users and stimulate user consumption, the price of storage products will also rise, at least until the production capacity is flooded, and the price of storage products will not fall sharply.
Write at the end
This round of AI wave sweeping the world is affecting thousands of industries, not only helping the memory chip industry out of the downturn, but also pointing out a new direction for the industry.
The implementation and popularization of AI is inseparable from massive amounts of data, and countless industries need larger and faster memory and flash memory, as well as storage solutions suitable for the AI era.
Source: Veer
As we all know, overseas memory chip giants have industry advantages, but the so-called advantages are more applicable to the traditional storage era. In the face of the new field of AI storage, domestic semiconductor storage brands, including Longsys, have the possibility of overtaking in corners through mobile terminals and server terminals.
With the advent of a new cycle, the global DRAM market is once again ushering in a boom period, and it remains to be seen whether memory vendors who have been working hard for two years can seize the new opportunities brought by AI.
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