Summary of Key Points
Recently, there has been a phenomenon where the spot price of some low-capacity eMMC (Embedded Memory Module) chips has fallen below the contract price set by the original manufacturers. However, this is a structural issue that only affects older technology-based MLC (Metal Logic Cell) particles in low-capacity models and does not indicate that the storage industry has reached its peak. The overall storage market continues to see price increases, but there is a divergence in trends between the consumer and server segments: demand for server storage remains strong, leading to continued price rises, while consumer demand has slowed down or even decreased slightly. 2027 will be a critical year for the industry, as the release of new production capacity (from overseas factories and domestic manufacturers such as ChangXin and Yangtze Memory) and changes in AI demand will determine the market's direction.
- Why are low-capacity eMMC chips affected first?
eMMC is commonly used in set-top boxes and low-end smartphones. The price inversion only occurred in low-capacity models (especially 64GB) that use MLC particles for three main reasons:
1. Discontinuation of older upstream technologies, leading to soaring costs: MLC is an outdated storage technology, and manufacturers like Samsung have stopped production. With fewer suppliers remaining, the contract price for MLC has increased by eightfold in two years (from $2 to $17 per 32GB).
2. Downstream demand failing to meet supplier expectations for upgrades: Suppliers intended for customers to upgrade directly from smaller capacities (8-32GB) to 64GB (using newer TLC particles), so they stocked up on 64GB chips in advance. However, low-end customers (such as set-top box manufacturers) have long procurement cycles and are reluctant to accept price increases, coupled with weak consumer demand, resulting in a surplus of 64GB chips.
3. Channel dealers selling at reduced prices to boost turnover: Unable to sell the excess inventory, traders resell the chips at lower prices to quickly recoup their funds (for example, the price of 64GB eMMC has decreased since the beginning of the year, but it is still higher than before the inversion).
- The storage industry is still growing, but with clear divisions
Overall, storage contract prices are rising, though the rate of increase has slowed. The trends between servers and consumers are very different:
- Server segment: Strong demand continues to drive price increases. There is a surge in demand for high-bandwidth storage (e.g., DDR5 memory), with DDR5 64GB 5600 memory strips increasing by 20% in just two to three months (from $2,400 to $3,000), and DDR5 RDIMM 32GB for servers rising by 23% in July.
- Consumer segment: Demand has slowed down or even decreased. Smartphone and PC shipments in China fell by 2% in the second quarter of 2026, putting pressure on storage prices. For example, DDR4 8GB memory strips for desktops, which peaked at $96 in March, have now dropped to $70 (still five times the price from the same period last year). Price increases for consumer-grade SSDs are likely to be limited to 0-5% in the fourth quarter.
- The effect of long-term contracts: Many customers have signed fixed-price agreements, locking in prices, so only those without such contracts are buying at higher spot prices.
- 2027: A year of critical decisions
The storage industry's performance in 2026 is relatively certain (contracts are locked in until the second half of next year), but 2027 will be decisive:
- DRAM: The gap in supply may widen as AI demand surges, with HBM (high-bandwidth memory used in AI chips) accounting for 30% of DRAM production capacity, compared to 22% previously. However, HBM production consumes three times more wafers than regular DRAM, exacerbating the supply shortage.
- NAND: Supply and demand may become more balanced as manufacturers upgrade to higher-capacity NAND chips, and new production capacity comes online. This could lead to a surplus of NAND unless AI systems that can perform tasks autonomously drive demand for high-speed SSDs.
- Impact of domestic production: New factories from ChangXin Technology in Shanghai and Yangtze Memory in Wuhan will start production in 2027, helping to fill some of the supply gap. However, since domestic manufacturers do not compete on price (their quotes are not lower than Samsung's), prices are unlikely to plummet; any decline will be modest at most.
- A-share storage module companies: Despite record profits in the first half of the year, stock prices have corrected due to over-optimism about future performance. In the future, companies that can transition to serving high-value customers (such as those in the enterprise and automotive sectors) will perform better.
Conclusion
The inversion in eMMC prices is a localized issue; the storage industry as a whole remains in a growth cycle, but differentiation is intensifying. 2027 will be a pivotal year, with production capacity and AI demand determining the industry's future. A-share storage module companies need to transform to maintain profitability. Investors should focus on whether companies have long-term contracts and are moving towards higher-value markets.