Summary of Key Points
Recently, the storage industry has entered a “super-profit-making period,” with many domestic and international companies (such as GigaDevice Technology, Jiangbolong, Samsung, Micron, and ChangXin Technology) experiencing soaring profits in the first half of the year. Net profit increases have ranged from several times to over a thousand times. The main reason is the imbalance between global storage chip supply and demand: downstream demand (from industries, consumers, automobiles, AI, etc.) has surged, while wafer production capacity has grown limitedly, leading to both increased volumes and prices of products. However, the industry faces the risk of cyclical fluctuations, and a reversal in supply and demand could lead to declining profits in the future; at the same time, stock prices have been highly volatile (for example, GigaDevice Technology’s stock price dropped before rising), reflecting market divergence on the cycle.
1. Profits Soaring: Figures Are Almost Unbelievable
The profit growth of these storage companies is not a slight increase but an explosive rise:
- GigaDevice Technology: Net profit of 6.9 billion yuan, a year-on-year increase of 1099% (from earning 1 yuan last year to 11 yuan this year).
- Jiangbolong: Highest net profit of 11 billion yuan, a year-on-year increase of 743 times (from earning 15 million yuan last year to 11 billion yuan this year).
- Samsung: Quarterly profit of approximately 397 billion yuan, an increase of 1810%.
- Micron: Net profit of 28.2 billion US dollars, an increase of 1398%.
- ChangXin Technology: Minimum net profit of 66 billion yuan, making it a significant player among domestic storage manufacturers.
These figures indicate that the storage industry has transformed from being lukewarm to becoming a “money-making machine,” with almost all participants reaping the benefits of the sector’s growth.
2. The Secret to Profitability: Increased Prices Due to Shortage
The sudden surge in profits can be attributed to a shortage of products that allows for price increases:
- Supply Shortage: Global production capacity for storage wafers (the basic material for chip manufacturing) is limited, and major companies like Samsung and Micron have not expanded production on a large scale, leading to a supply gap.
- Strong Demand: Downstream demand has exploded—industrial equipment requires storage chips, electric vehicles need data storage, AI models consume大量 memory, and even the demand for storage in smartphones and computers is increasing.
- Result: Products are being sold in larger quantities at higher prices. For example, GigaDevice Technology’s storage chips have seen both increased sales volumes and price increases, and its microcontroller chips (used to control devices) have also seen a rise in shipments due to strong demand.
3. Hidden Concerns: The Cyclical “Curse” Looms Large
The storage industry has a history of cyclical fluctuations, similar to tides:
- Past Examples: A few years ago, there was an oversupply of storage chips, leading to price drops and losses for many companies; now, the opposite situation has caused prices to skyrocket due to demand exceeding supply.
- GigaDevice Technology’s Warning: If production capacity increases (for example, if major companies start expanding) or demand declines (such as a cooling in the AI market), profits could fall.
- In Simple Terms: We are currently in a “peak season,” but all peak seasons eventually end. One should not only focus on current profits but also be prepared for potential downturns.
4. Stock Price Volatility: A Barometer of Market Sentiment
Storage companies’ stock prices have been highly volatile, as seen with GigaDevice Technology:
- From June 30 to July 8: The stock price fell continuously for 7 days, dropping by 28% (the market was concerned about the cycle reaching its peak or some investors selling their shares).
- On July 9: After the earnings forecast was released, the stock price soared due to the impressive numbers.
- Behind the Logic: Investors have mixed views on the storage industry—some are optimistic about short-term profits, while others fear a reversal in the cycle and potential losses.
5. The Rise of Domestic Storage
The success of domestic companies (GigaDevice Technology, Jiangbolong, ChangXin Technology) indicates:
- Technological Progress: Domestic storage technologies have improved; for example, ChangXin Technology can produce DRAM (common memory chips used in smartphones and computers), and GigaDevice Technology offers NOR Flash (small-capacity storage chips), reducing reliance on imports.
- Market Share Growth: Domestic companies are now competing with international giants like Samsung and Micron for market share. ChangXin Technology’s net profit of 66 billion yuan proves that domestic storage has become a significant force in the industry.
- Significance: This is an important milestone in the substitution of imported semiconductors, providing domestic companies with a foundation for long-term development even if the cycle reverses.
Conclusion
The storage industry is currently in a golden period, but its cyclical nature should not be forgotten. Ordinary investors looking to enter the market need to understand the concept of cycles—current high profits do not guarantee continued success, and they must be cautious about potential changes in supply and demand. For domestic storage companies, this boom provides an opportunity to build capital and technology for long-term growth.