Summary of Key Points
This news article focuses on three critical contradictions within the storage industry: impressive performance yet plummeting stock prices, leading companies expanding production against the trend, and whether a two-and-a-half-year upward cycle has reached its peak. It analyzes these issues by examining 10 research reports from three perspectives: supply and demand dynamics, leverage trading in the Korean stock market, and the inherent patterns of industry cycles. The aim is to provide readers with a deeper understanding of the underlying logic behind the current fluctuations in the storage market.
1. Good Performance but Plummeting Stock Prices – The Market is “Betting on the Future,” Not the Present
Storage companies are performing well now because storage prices have been rising in recent months (for example, DDR5 and HBM memory prices have doubled), allowing them to profit from past gains. However, stock prices reflect **future expectations.* The market is concerned about whether storage prices will fall in the future. For instance, DDR4 memory prices have recently started to decline, with some products seeing a 5% decrease per month. Investors are also worried that companies like Samsung and SK Hynix are expanding production, which could lead to an oversupply and subsequent price collapses. Therefore, even though performance is good, investors are selling their stocks in anticipation of potential losses. This is similar to putting away clothes before a rain forecast, not because it’s sunny now, but out of fear of future rainfall.
2. Samsung and SK Hynix Expanding Production – Not “Irrational,” but a “Precise Bet on High-End Markets”
Their expansion is focused on high-end storage (such as HBM high-bandwidth memory, essential for AI servers), not on standard DDR4 memory. Why?
1. Strong AI Demand: There is a severe shortage of HBM, with prices tripling yet still being in high demand from AI companies.
2. High Technical Barriers: HBM requires advanced manufacturing techniques that smaller manufacturers cannot handle; expanding production in this area helps them displace competitors and consolidate market share.
3. Anticipating Future Trends: By expanding now, they can capitalize on potential growth in AI demand when capacity is finally available (which will take 1-2 years).
This expansion is not blind; it targets the high-end market, where there is significant potential.
3. The Two-and-a-Half-Year Upward Cycle – Is It Coming to an End? It Depends on the Balance of Supply and Demand
The essence of storage industry cycles is imbalance between supply and demand leading to price fluctuations:
- Reasons for Price Increases in the Past Two and a Half Years: A rebound in mobile and PC demand following the pandemic, coupled with the surge in AI, against a backdrop of reduced production due to previous years’ losses, resulting in a shortage.
- Current Signals:
- Demand Side: Mobile and PC demand has peaked, and while AI demand remains strong, its sustainability is uncertain.
- Supply Side: Samsung and SK Hynix are starting to release high-end capacity, with other manufacturers following suit.
If supply grows faster than demand, prices will fall, and the cycle may turn. Currently, there is an oversupply of low-end storage (DDR4), while high-end (HBM) is still in short supply. However, as high-end production increases, the entire cycle may begin to peak.
4. Korean Stock Market Leverage – The “Accelerator” of Storage Stock Price Drops
The Korean stock market features a significant use of leverage trading by investors buying storage stocks using borrowed funds from brokers. When prices start to fall:
- Brokers require additional margin from investors.
- If investors cannot meet the requirements, brokers may sell their stocks compulsorily (forced liquidation).
- The more stocks are sold, the sharper the price drops, leading to a chain reaction of forced liquidations in leveraged accounts.
This is why, despite strong performance, storage giants’ stock prices can plummet so sharply—the leverage magnifies market panic.
5. Hidden Details in the Cycle Pattern – Is This Different from the Past?
Traditional storage cycles follow a pattern of comprehensive price increases → widespread production expansion → oversupply → sharp price declines, but this time there are new developments:
1. Structural Diversification: High-end storage (HBM) prices are still rising, while low-end (DDR4) prices have fallen, indicating a differentiated trend.
2. More Rational Corporate Behavior: Leading companies are focusing on high-end production to avoid oversupply.
3. The Role of AI: AI demand could extend the high-end cycle, potentially sustaining it for 2-3 years instead of causing a quick collapse.
Therefore, this current cycle is not a simple repetition of past patterns; it represents a structural shift, with high-end markets continuing to perform well while low-end sectors face challenges.
Conclusion
The current turmoil in the storage industry reflects a clash between future expectations and current reality: Good performance is a matter of the present, but the market fears future oversupply. Leading companies are expanding production in high-end areas rather than following a blind trend. Whether the cycle has reached its end depends on the balance of high-end demand and supply. For individual investors, it’s crucial to pay attention not only to company performance but also to supply and demand dynamics in high-end storage and leverage-related market sentiment in the Korean stock market, as these factors significantly influence stock prices.