AI Demand Drives Memory Market Super Cycle, Supply Shortages Expected in 2025

Summary: The memory market is on the brink of a "super cycle" driven by the escalating demand for AI and insufficient capital investments over the past two years. This supply-demand imbalance is projected to reach its zenith in 2025, with DRAM and HBM (High Bandwidth Memory) experiencing substantial shortages. HBM, a specialized DRAM variant tailored for high-performance computing, is anticipated to see its demand soar, possibly constituting 30% of total DRAM usage.

The absence of new manufacturing facilities and the decline in capital expenditure since 2022 have intensified the supply shortage. Memory product prices are expected to escalate dramatically, with HBM and server DRAM spearheading the price hike. Companies such as SK Hynix and Samsung, strategically positioned in the market, are likely to reap significant benefits, with their market shares and profitability poised for growth.

Insights: This cycle diverges from historical trends due to the unique surge in demand from AI applications and the underinvestment in capacity expansion. The transition towards HBM, which demands more wafer capacity per bit and has lower production yields, further exacerbates the supply challenges. As customers prioritize securing supply over price, the fundamental dynamics of the memory market are shifting, favoring entities with strong production capabilities.

Explanations:

• DRAM (Dynamic Random-Access Memory): A type of memory commonly used in computers and other devices for temporary data storage.
• HBM (High Bandwidth Memory): A high-performance variant of DRAM that utilizes stacked memory chips, primarily employed in advanced computing systems such as AI servers.
• Capital Expenditure (CapEx): The funds utilized by a company to acquire, upgrade, or maintain physical assets like factories, machinery, or equipment.
• Wafer: A thin slice of semiconductor material used in the production of integrated circuits.