"From DRAM, NAND flash memory, to hard disk drives (HDDs), all four major storage products are experiencing a simultaneous shortage. This is the first time in my 30 years of experience in the industry," said Chen Libai, Chairman of Taiwan's ADATA Technology Co., Ltd., the world's second-largest DRAM module manufacturer, at a press conference on October 13th. He pointed out that as the giants in the artificial intelligence (AI) server market have absorbed global storage demand, the existing supply chain rules are being completely rewritten.
Chairman Chen stated, "Our competitors are no longer module companies in the same industry, but cloud service providers (CSPs) like OpenAI, Google, Amazon, and Microsoft." He added, "With the explosion in demand for AI servers, original equipment manufacturers like Samsung Electronics, SK Hynix, and Micron are prioritizing orders from these companies." In the past, ADATA sourced chips from storage manufacturers like Samsung and manufactured the finished products, acting as a "middleman." However, now large CSPs are skipping this process altogether, signing large-scale, long-term contracts with chip manufacturers. This is a completely different situation.
As storage manufacturers focus their production capacity on high-value-added products like HBM (High Bandwidth Memory) and DDR5 for AI servers, the supply of chips available to module manufacturers has drastically decreased. Chairman Chen admitted, "We're being squeezed so hard by the AI server giants that we're practically dying." He added that the company has even issued internal instructions to control shipments. Even though customers are willing to pay a premium to secure shipments, the company is adjusting its shipment pace, prioritizing core customers based on the potential for future price increases.
DDR4 chips
This concentration of capacity among storage manufacturers is having a significant impact on the entire market. In particular, the shortage of older DDR4 chips is expected to persist for several years. While the server and PC markets are transitioning to DDR5, a large number of devices, such as TVs and network equipment, still use DDR4.
Chairman Chen stated, "Samsung Electronics, SK Hynix, and Micron have all but ceased DDR4 production and are only fulfilling their existing long-term contracts at a minimum." "Once production equipment is shut down, restarting it is extremely difficult, so a supply shortage for at least the next two years is inevitable." As a result, spot prices for 16Gb DDR4 have risen by approximately 44% in three months, more than quadrupling (approximately 413%) compared to a year ago. Prices for 16Gb DDR5 products have also increased by approximately 83% in just one month.
It's not just DRAM. The NAND flash memory market, which was experiencing an oversupply at the beginning of the year, is also rapidly heating up. In the past, cloud service companies typically stored less frequently accessed, large-capacity data on inexpensive HDDs and stored data requiring faster computation on NAND-based SSDs. However, recent HDD shortages have forced companies facing storage shortages to purchase expensive enterprise-grade SSDs. Market research firm TrendForce predicts, "Due to the impact of HDD production cuts and a surge in high-capacity SSD orders, NAND prices will increase by an average of 5% to 10% in the fourth quarter of this year."
Industry insiders agree that this AI-driven storage crisis is fundamentally different from previous ones. Past cyclical fluctuations due to inventory adjustments or price declines are now a thing of the past. Structural demand driven by the expansion of AI infrastructure is ushering in a new era of long-term prosperity.
Chairman Chen also stated, "The fixed demand driven by AI is completely disrupting the storage boom cycle of the past three to four years, and this boom will last until at least 2026."
—An unprecedented new market is emerging.
Source: Content from biz.chosun
