Key Takeaways
Memory module maker Transcend Information’s chairman said the market for DRAM and NAND flash is in a state of severe shortage, with second-quarter DDR5 prices jumping as much as 50 percent as the artificial intelligence boom upends the global supply chain. The tight supply is unlikely to ease this year.
"Market rumors about a loosening of memory prices are inconsistent with the actual supply situation of manufacturers such as Samsung and Micron," Chairman Shu Chongwan said at an investor meeting Wednesday. "The current supply gap is large, and customers are rushing for goods almost every day."
The price of DDR5 memory rose 40 percent to 50 percent in the second quarter from the first, and procurement demand is still not fully satisfied, Shu said. He noted that the supply gap for older DDR4 memory is also widening. Despite market talk of production increases, major DRAM makers like Samsung, Micron, and SK Hynix are hampered by long factory construction cycles of at least two years and equipment lead times stretching to one and a half years, making a near-term supply boost improbable.
The extreme shortage stems from a structural shift in demand driven by the rapid expansion of AI. The crisis is forcing downstream manufacturers to downgrade product specifications to manage costs, such as substituting 8GB memory modules for 16GB, or 128GB of storage for 256GB. This contrasts with the previous pandemic-era disruptions, representing a more fundamental imbalance tied to AI's integration across the economy.
The surge in AI has made DRAM and flash memory indispensable for any device with a CPU, while edge AI and automation equipment are also competing for limited resources. This has led to a comprehensive scramble for chips that began in September of last year. The focus on producing high-bandwidth memory (HBM) for AI applications creates a cascading effect, risking shortages of the traditional DRAM used in smartphones and computers.
The supply crunch is expected to translate into higher consumer prices. The average sales price of a new smartphone is estimated to rise by 14 percent, with laptop manufacturers reportedly planning price hikes of 10 percent to 30 percent, according to industry reports.
In response to the tightening supply, Transcend has adopted a strategy of selectively supporting clients, as it cannot meet all customer demands. Shu emphasized that the company's policy is to deal directly with manufacturers like Samsung and SanDisk, avoiding the volatile spot market to mitigate risks from substandard products.
For manufacturers reliant on memory chips, this environment necessitates a more strategic approach to procurement. Transcend, for example, completed a "last-time buy" for MLC NAND flash products used in industrial applications, securing enough inventory to last through the end of the year after suppliers Kioxia and SanDisk announced their exit from the MLC market. This proactive inventory management ensures supply continuity for its existing customers in that segment.
This article is for informational purposes only and does not constitute investment advice.
