Summary of Key Points
The recent semiconductor storage market (DRAM and NAND) has experienced unprecedented explosive growth: sales have increased tenfold in just three years, with a year-on-year growth rate of 285% (far exceeding the 60% during the storage bubble in 2017). This surge is mainly driven by the AI boom, which has led to massive investments in data centers by large-scale cloud service providers, causing storage prices to skyrocket (both DRAM and NAND prices have increased tenfold). However, historical trends indicate that the best period of growth for the storage industry lasts for approximately five years, followed by a more severe downturn. Companies also need to be wary of geopolitical risks related to the supply of helium and photoresists and should prepare in advance for potential challenges.
1. How Booming is the Storage Market?
The growth in the storage market has gone beyond what can be described as "active"; it's almost an "explosive increase":
- Dramatic Increase in Sales: Monthly storage sales were only $5.8 billion at the beginning of 2023, but they soared to $63.3 billion by May 2026, a tenfold increase in three years; if calculated from 2016, the growth over ten years is elevenfold.
- Exorbitant Growth Rate: The year-on-year growth rate of 285% is nearly five times that of the peak during the storage bubble in 2017 (60%), while other semiconductor categories (such as logic chips) have grown by only around 40%, which is not even in the same order of magnitude.
- Structural Shift: DRAM and NAND are now the dominant players. In early 2023, their combined market value was $18.4 billion; it is expected to reach $226 billion by Q2 2026 (annualized to over $900 billion). Storage, once considered a "cheap commodity," is now competing with logic chips for dominance in the industry.
2. Why is the Market Suddenly So Booming?
The core reason for this growth is not so much higher sales volumes but rather skyrocketing prices (a tenfold increase in unit prices), driven by the surge in AI demand:
- AI Data Centers as a Major Driver: After ChatGPT ignited the generative AI revolution, the four major cloud service providers (Amazon, Google, etc.) are expected to invest $755 billion in data center infrastructure in 2026—equivalent to Japan's annual national budget—all directed towards AI data centers.
- Shift in Production Focus: Manufacturers are prioritizing the production of storage for AI applications (such as HBM and high-performance DRAM/NAND), leading to severe shortages in storage for consumer products (PCs, smartphones, gaming consoles), which in turn drives up prices.
- Consequences for Consumers: PC and smartphone manufacturers unable to secure sufficient storage face soaring procurement costs, which they pass on to consumers. Behind the AI boom lies the increase in prices and shortages of electronic products in our daily lives.
3. How Long Can This Boom Last?
Historical patterns show that the best period of growth in the storage industry lasts for about five years, after which a sharp decline is inevitable:
- The Silicon Cycle: The demand increases → prices rise → manufacturers expand production → oversupply → price collapse. Over the past 35 years, the longest period of growth has always been five years, with no exceptions.
- Past Trends: For example, after a 50% increase during the IT bubble in 2000, prices plummeted by 49.5% in 2001; following a 60% increase during the storage bubble in 2017, prices dropped by 33% in 2019. The current 285% growth rate could lead to the most severe downturn in history.
- No Exception: People always claim that "this time is different," but the outcome remains the same: every bubble eventually bursts.
4. What Preparations Should Be Made?
It's essential to prepare for both potential demand declines and supply disruptions:
1. Plans for a Possible Demand Drop
- Build Cash Reserves: Save the current profits rather than spending them on expansion or dividends to withstand several years of losses.
- Avoid Blind Expansion: New production capacity will take 2-3 years to be fully operational, which may coincide with the peak of the downturn, becoming a heavy burden for companies.
- Diversify Customers: Don't rely solely on AI cloud service providers; explore diversified markets such as automotive and industrial equipment to mitigate sudden demand shocks.
2. Risk Mitigation Strategies for Supply Disruptions
- Helium Crisis: Helium is essential for semiconductor manufacturing (cooling wafers), with 33% of the global supply coming from Qatar. Geopolitical conflicts could disrupt supplies, leading to factory shutdowns. Companies should diversify their sources, increase inventory, and invest in equipment recycling.
- Photoresist Crisis: Photoresist is derived from naphtha (dependent on Middle Eastern oil) and is prone to degradation and difficult to replace. Long-term contracts and diversified supply chains are necessary, along with research into alternative materials.
These preparations may seem modest, but they can be crucial at critical moments. After all, the AI boom could end sooner and more suddenly than expected.
Final Reminder
The greater the excitement now, the more dangerous the future might be. Don't let short-term profits cloud your judgment; make thorough preparations to survive the potential downturn and wait for the next opportunity to thrive.
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