Summary of Key Points
Recently, companies such as Apple and Microsoft have raised their prices, driven by the soaring costs of memory chips—especially DRAM and HBM. The price of LPDDR5X memory increased by 89% in just one quarter, and the spot price of HBM more than doubled. The three global leaders in memory production (Samsung, SK Hynix, and Micron) have reaped huge profits; SK Hynix’s operating margin even surpassed that of Moutai (72% vs 67%), with a combined market value of nearly $4 trillion. Downstream companies (consumer electronics, AI startups, and small to medium-sized cloud providers) are forced to bear the increased costs, which ultimately fall on consumers. Chinese companies ChangXin Memory and Yangtze Memory are rapidly expanding their production capacity, potentially breaking the monopoly of these three giants and bringing hope for price stabilization in the global memory market.
Why Have Memory Chip Prices Soared? — AI Demand Has Snapped Up Production Capacity
The main reason for the price increase is the explosive growth in AI demand. AI servers require large amounts of high-bandwidth memory, such as HBM; for example, a server equipped with 8 H100 GPUs needs more than 800GB of HBM alone. Only the three leading companies can produce HBM on a large scale, and they have shifted most of their production to higher-profiting HBM (with profits five times that of consumer-grade memory), leaving less than 30% of their capacity for smartphones and computers.
For instance, Apple purchases several tons of memory chips each year, but given the priority given to HBM, this amount is insufficient. The three giants prefer to supply AI customers rather than consumer electronics companies. As a result, the supply of consumer-grade memory (like LPDDR5X) has tightened, leading to skyrocketing prices: the price of a 12GB LPDDR5X chip increased from $77 to $145 (an 89% increase in one quarter), and the price of DDR5 server memory tripled.
Who Has Made the Biggest Profits from the Price Hikes? — The Three Giants’ Margins Exceed Those of Moutai
The three memory giants are enjoying historical profits:
- SK Hynix: Net profit in Q1 2026 was 178.7 billion RMB (five times the same period last year), with an operating margin of 72%—5 percentage points higher than Moutai’s 67% in 2025.
- Samsung: The memory division’s gross margin is 55%-60%, and although its overall profit was lower due to the smartphone business, the memory business still generated significant profits.
- Micron: Its stock price soared by 16% after the latest financial report, with a market value exceeding $1.18 trillion.
Even more strikingly, the giants have locked in the price increases through long-term supply agreements (LTAs): Customers must prepay 40% of the cost, and prices are increased by 64% annually for contracts lasting 2-5 years. This is essentially a form of “strategic rent collection”—if you want AI computing power, you have to pay.
Who Is Bearing the Cost? — Everyone from AI Startups to Ordinary Consumers
The increased costs are passed on at every level:
1. AI startups and small to medium-sized cloud providers: They can only purchase spot goods, and with HBM and GPU prices rising by over 100%, the cost per server has doubled, potentially leading to greater losses.
2. Consumer electronics brands: Products like the Apple iPhone 17 series have seen price increases of $100, and MacBook prices have risen by 5%-8%; Huawei and Xiaomi’s flagship phones have increased by 300-500 yuan.
3. Ordinary consumers: Buying smartphones and computers is now more expensive; for example, the storage cost for a $10,000 iPhone accounts for nearly $4,500—more than the cost of the screen and chips.
In short, the three giants are reaping the benefits at the top of the supply chain, while all intermediate players are suffering.
Why Doesn’t TSMC Do the Same? — Reasonable Profits Are Key to Long-Term Success
As another leading semiconductor company, TSMC’s approach is different: Its gross margin in Q1 2026 was 66% (lower than SK Hynix’s operating margin), but its market value ($1.9 trillion) exceeds that of any of the memory companies.
TSMC CEO Wei Chia-jia said, “I envy memory companies for raising prices by four times and earning 80% in gross profit, but we won’t do the same.” TSMC positions itself as a “stabilizer in the AI ecosystem”—customers invest billions in chip production and need long-term, reliable partners, not suppliers that take advantage of market turmoil.
To use a restaurant analogy: TSMC is like a place with good food at reasonable prices that benefits the entire neighborhood; the three giants are like those that raise prices as soon as there’s demand and charge annual fees—TSMC can sustain itself in the long run, while the others will eventually be replaced by more competitive players.
Can ChangXin and Yangtze Memory Change the Situation? — New Supply Is the Key to Breaking the Monopoly
Chinese memory companies are rising rapidly. This is not just about “domestic substitution” but an inevitable outcome of industrial economics: when monopolists earn too much, new suppliers will emerge.
- ChangXin Memory: Revenue in Q1 2026 was 50.8 billion RMB (a year-on-year increase of 719%), with a global DRAM market share of 8%, and it is expected to overtake Micron as the third-largest supplier by the end of the year. Its DDR5 production capacity is increasing, and its prices are 10%-15% lower than those of the three giants.
- Yangtze Memory: Its NAND market share is 13% (only 7% in 2024), and it has already started mass-producing 232-layer 3D NAND with a monthly capacity of 500,000 chips, using a high percentage of domestically produced equipment (over 50% localization in the third phase).
Although their HBM technology is still underdeveloped, the expansion of their memory production capacity will gradually erode the monopolistic power of the three giants. It’s like having a fourth restaurant open on the street; the existing ones can no longer raise prices arbitrarily.
Conclusion: Excessive Profits Won’t Last Forever
The 72% profit margins of the three giants indicate a structural imbalance—when profits are heavily tilted towards the upstream, the growth of the entire AI ecosystem will slow down. The rise of ChangXin and Yangtze Memory is crucial for correcting this imbalance. In the future, the memory industry will return to more “reasonable” profit levels (similar to TSMC’s 66% gross margin), allowing the AI ecosystem to grow more healthily.
In summary, it’s fine for memory companies to make profits, but they shouldn’t drive their downstream partners out of business. After all, the AI market needs to grow together for everyone’s benefit in the long run.