New opportunities in the memory chip industry
Memory chip prices continued to rise
In the fourth quarter of 2023, the price of memory chips has rebounded significantly. Samsung, SK hynix and other major manufacturers have announced that they will continue to raise the price of memory chips in 2024. This indicates that the memory chip industry has entered an upward cycle, and the situation of short supply is beginning to emerge.
Looking back on the past year, the memory chip industry can be said to have suffered a Waterloo. Since the second half of 2022, due to factors such as weak demand in the consumer electronics market, the price of memory chips has been declining. In 2023, the situation will be even more severe, with low-priced or even loss-making transactions at one point. Samsung, Micron, SK hynix and other memory chip giants lost tens of billions of dollars throughout the year, hitting a record low.
In the face of such a bad market situation, memory chip manufacturers have to take self-help measures such as reducing production and controlling production capacity. The data shows that in 2023, the production of NAND Flash of major storage manufacturers will be reduced by 30% to 50%, especially for mature process products with large production capacity. As a result of these efforts, by the fourth quarter of 2023, the balance between supply and demand is finally starting to turn positive.
With the rapid recovery of terminal consumer electronics expectations and confidence, this round of destocking cycle has been significantly improved. Memory chip manufacturers have finally regained pricing power and have launched price increase plans. In the case of SK hynix, the company announced that it will raise the contract price of DRAM and NAND Flash chips by 10% to 20%. Other manufacturers such as Samsung and Micron have made similar moves.
Industry insiders, this round of price adjustment quickly saw results. Taking domestic memory chip company Longsys as an example, the company is expected to achieve revenue of 3.5 billion to 4 billion yuan in the fourth quarter of 2023, an increase of about 70% quarter-on-quarter and 80% year-on-year, respectively. Gross margin will also recover by more than 13 percentage points. As demand continues to pick up, the upward momentum of memory chip prices will continue for some time.
Artificial intelligence brings new demand
The arrival of the wave of artificial intelligence has brought unprecedented development opportunities to the memory chip industry. Emerging applications, represented by large AI models, have seen a surge in demand for high-performance memory chips such as HBM (High Bandwidth Memory).
HBM has the advantages of high capacity, high bandwidth, low latency, and low power consumption, and is regarded as an ideal memory chip for AI training and inference. Data shows that the average selling price of HBM chips in 2023 is as much as five times that of traditional DRAM memory chips. HBM supply will grow at a compound annual growth rate of up to 45% in the coming years, and prices will remain high for a long time.
In the face of the hot demand for high-end memory chips such as HBM, memory chip giants have accelerated their production expansion. Taking SK hynix as an example, the company's vice president revealed that the company's HBM production capacity has been sold out in 2023 and is preparing for 2025. The CEO of Micron Technology also said that the company's HBM production capacity is expected to be sold out in 2024.
In order to seize the opportunities brought by the AI wave, memory chip manufacturers are also accelerating the pace of technology iteration of high-end products such as HBM. Micron's latest HBM3E is considered the highest-spec DRAM product for AI applications, and has begun mass production and will be used in NVIDIA's AI chips. Samsung and SK hynix are also actively promoting the development and mass production of next-generation high-end memory chips such as HBM4.
In addition to AI, emerging application scenarios such as smart cars and the metaverse will also generate a large number of new storage requirements. Taking automotive electronics as an example, the demand for memory chips for new energy vehicles and autonomous vehicles is growing rapidly. It is estimated that by 2030, the demand for single-vehicle memory chips will reach 2GB, and the entire automotive electronic memory chip market will exceed 20 billion US dollars.
Development opportunities for domestic memory chips
Driven by emerging applications such as artificial intelligence and smart cars, domestic memory chip companies will also usher in important development opportunities.
In recent years, with the strong support of national policies, domestic memory chips have made breakthroughs. Enterprises represented by YMTC and Changxin Storage have achieved breakthroughs from 0 to 1 in the field of 3D NAND Flash and DRAM memory, with continuous improvement in product quality and production capacity, and global market share expanding year by year.
The domestic memory chip industry chain is also accelerating its improvement. In terms of design, equipment, materials and other links, more and more domestic enterprises have begun to cut in, forming a preliminary supporting capacity. This provides solid support for domestic memory chip companies.
Industry insiders believe that driven by emerging applications such as AI and smart cars, domestic memory chip companies will usher in an important window of development. On the one hand, emerging applications have higher performance requirements for memory chips, which gives domestic companies the opportunity to take a share of the high-end market; On the other hand, the demand for memory chips for emerging applications is also growing rapidly, which will push domestic companies to further expand their production capacity.
Compared with international giants, there is still a certain gap between domestic memory chip companies in terms of technology accumulation and production capacity. However, as long as we seize the opportunity and occupy a place in emerging application fields, domestic memory chips are expected to take advantage of our strength to achieve corner overtaking.
Memory chip technology innovation
The continuous innovation of memory chip technology will promote the development of the entire industry to a higher level. In many fields such as 3D stacking and new storage media, technological innovation in memory chips is underway.
Taking 3D NAND as an example, various memory chip manufacturers are constantly breaking the record for the number of stacked layers. Currently, SK hynix has launched a 321-layer 3D NAND Flash sample, and plans to achieve mass production in 2025. Samsung's ultra-300-layer 3D NAND Flash has also made important progress and is expected to achieve mass production this year.
By increasing the number of stack layers, the storage density of 3D NAND will continue to increase, and it is expected to break through the current physical limits. Memory chip manufacturers are also exploring new storage media to further increase storage density. Domestic companies such as YMTC have made breakthroughs in innovative storage technologies such as Xstacking, which is expected to lead the next generation of storage technology revolution.
In the field of high-end memory chips, new high-bandwidth memories such as HBM and HBM3E are also constantly being introduced. Taking HBM3E as an example, compared with the previous generation HBM2E, its internal vertical density has been increased by more than 20%, and the product yield has also been improved. More high-end products such as HBM4 will continue to be launched to provide more powerful storage support for AI and other applications.
In addition to hardware innovation, the design technology of memory chips is also constantly innovating. Taking Micron as an example, the company's latest HBM3E product adopts a programmable and read voltage configuration based on the number of layers, which effectively compensates for the distribution of device characteristics with the physical structure of the array and reduces the impact of cell crosstalk.
Driven by emerging applications, the pace of memory chip technology innovation will only continue to accelerate. The performance, density, and energy efficiency ratio of memory chips will be comprehensively improved, injecting new impetus into the development of the digital age.