Summary of the Core Content
This news article focuses on the supercycle in storage chips triggered by the AI boom: The surge in demand for high-end storage (such as HBM) from AI servers has led to soaring prices for storage chips. As a result, the stock prices of upstream manufacturers (Samsung, SK Hynix, Micron) have skyrocketed. However, these companies must balance short-term profits with long-term technological investments. Midstream module manufacturers are reaping huge profits but have divergent strategies, while distributors are making modest gains. Downstream end-users are forced to raise prices, and smaller companies are facing survival crises. No one in the industry is completely exempt from the impacts of this supercycle; everyone is both benefiting and under pressure.
Detailed Analysis
1. Upstream Manufacturers: The Twists and Turns Behind the Glitz
Storage chip manufacturers are currently highly sought after in the capital market (SK Hynix is considered the “next Nvidia,” with a market value in the trillions of dollars), but their situation isn’t as rosy as it seems:
- Dilemma in Capacity Allocation: High-end storage (HBM) required for AI has high profits, but producing the same capacity takes 2-3 times more wafer area than regular memory (DRAM) and requires complex packaging technologies. Manufacturers must invest most of their funds in HBM to maintain long-term leadership, yet they cannot afford to overlook the short-term profits from DRAM production. For example, SK Hynix has delayed the development of HBM3E and instead increased its investment in general-purpose DRAM to prevent Samsung from taking market share in the short term.
- Lock-in by Major Customers: Giants like Nvidia have signed long-term contracts (SCAs) that require payments even if they don’t purchase the products, locking in revenue for manufacturers but also forcing them to increase investment in next-generation products. Moreover, Nvidia often diversifies its suppliers (for instance, using both SK Hynix and Samsung), leaving manufacturers constantly competing on technology.
- The Cycle’s Inescapable Fate: Although this cycle is driven by AI, the fundamental rules of the storage industry remain unchanged: survival relies on “one generation of products plus capacity expansion to outcompete competitors.” If terminal demand collapses due to high prices (e.g., in consumer electronics), manufacturers’ good times could end abruptly.
2. Midstream Merchants: Some Prosper, Others Suffer
The excitement in the upstream market is reflected in the midstream sector, where there are clear differences among companies:
- Module Manufacturers with Divergent Strategies: Companies like Jiangbolong and Baiwei Storage (which convert chips into memory modules and SSDs) are experiencing explosive growth—Jiangbolong’s first-quarter net profit was 3.8 billion yuan, 2.7 times its annual total last year; Baiwei’s quarterly net profit was 3.4 times last year’s. Their approaches vary: Demingli has made the largest inventory purchases, while Jiangbolong focuses on a multi-market strategy (enterprise, automotive, and consumer segments), and Baiwei differentiates itself through integrated packaging and testing services.
- Distributors’ Meager Profits: Compared to manufacturers’ 70% and module manufacturers’ 50% gross margins, distributors’ margins are very low (only 3% for Xiangshun Xinchuang). The spot market has cooled down, and the speculation in inventory has diminished, making it harder for distributors to make substantial profits. They can only rely on high volumes to earn a meager profit margin.
3. Downstream End-users: Raising Prices or Facing Bankruptcy
The rising cost of storage has pushed end-users to a corner:
- A Tough Choice: Large companies have the option to raise prices (e.g., Apple and Nintendo); smaller companies have no such choice. For example, GoPro, a popular action camera brand, has issued warnings about potential bankruptcy due to storage shortages.
- Strategies to Cope: They either raise prices directly (by launching expensive flagship products or foldable screens) or indirectly (by charging extra for storage upgrades on older devices), or they try to cut costs and increase efficiency (using cheaper screens or reducing year-end bonuses). However, the industry has entered a new cycle of high costs, low supply, and slow innovation, making it difficult for smaller companies to survive.
4. Ordinary Consumers: Surviving the “Memory Crisis”
The price increases are ultimately passed on to consumers, who are seeking ways to save money:
- Reusing Old Devices: The market for recycling old phones has flourished, with users removing storage chips from them for reuse.
- DIY Assembly: Users overseas have shared guides on GitHub for assembling computers using spare parts.
- Reducing Purchases: People are avoiding buying new devices or opting for models with smaller storage capacities.
In this “memory crisis,” consumers are the ones bearing the brunt and are forced to be creative in saving money.
5. The Nature of the Supercycle: AI as the Driver, but Risks Lurk Behind
While AI is the driving force behind this supercycle, the risks are also evident:
- Sustainability of Demand: Current demand for AI servers is strong, but if cloud companies reduce their capital spending (e.g., due to an AI bubble bursting), storage demand could plummet.
- Capacity Overcapacity: Manufacturers are rapidly expanding production of high-end storage, but if future demand fails to keep up, the excess capacity could lead to price collapses, repeating past cycle tragedies.
- Rapid Technological Change: The iteration cycle for HBM is short (for example, HBM3 has just emerged before HBM4 was announced), requiring continuous investment in research and development. Manufacturers that fall behind will be quickly eliminated.
In summary, this supercycle is like a “doom game” where everyone is walking on a tightrope. The cost of rapid wealth accumulation comes with long-term risks, and the only goal is to survive.