1. Event-Driven: The Super Cycle of Storage Chips
Benefiting from the wave of artificial intelligence, the “super cycle” of storage chips is accelerating comprehensively. Samsung Electronics and SK Hynix have raised the prices of their DRAM and NAND flash memory by as much as 30%. According to forecasts from Citigroup and Morgan Stanley in their semiconductor industry analysis reports, the average selling price of DRAM in the fourth quarter is expected to rise by 25% to 26%, an increase of over 10% compared to the previous quarter, and the price surge may further intensify. Additionally, Goldman Sachs has recently raised its capital expenditure forecast for leading cloud companies in China, predicting that the surge in AI inference demand will drive giants like Alibaba and ByteDance to continue increasing investments. It is expected that Alibaba’s total capital expenditure from fiscal years 2026 to 2028 will reach 460 billion RMB, significantly higher than the company’s previous target of 380 billion RMB. The first round of price increases for storage began in April this year when Samsung announced it would gradually stop producing DDR4 memory chips to focus on higher-end, more profitable DDR5, LPDDR5, and HBM memory. Subsequently, SK Hynix also began to gradually reduce DDR4 production capacity, planning to compress DDR4 capacity to about 20%. The second round of price increases began in September when SanDisk announced a price increase of over 10% for products aimed at all channels and consumer customers, with plans for regular price assessments and potential further adjustments. The CFM flash memory market indicated that the DRAM price index has risen by about 72% in six months, and the sentiment for NAND price increases is high, with expectations that enterprise storage prices will rise in the fourth quarter.
2. Large Market Space in the Storage Industry
Storage chips, which have strong cyclical properties, are the second largest segment in the semiconductor industry, following logic chips. Compared to other semiconductor varieties, storage chips are more cyclical. For example, in 2023-2024, the market size for storage chips in 2023 is 92.3 billion RMB, a year-on-year decline of 29%, while the market size for 2024 is expected to be 165.5 billion RMB, a year-on-year increase of 79%. We believe the strong cyclicality is mainly due to:
1) Technology Segment: The standardization level of products is high, and the generational standards for memory are generally based on JEDEC solid-state technology association standards, with performance differences among products of the same generation being minimal;
2) Supply Side: The storage industry is an oligopoly market, with the global market basically monopolized by 3-5 major manufacturers. The DRAM market is dominated by Samsung, Hynix, and Micron, with a CR3 market share exceeding 90%; the main suppliers in the NAND Flash market include Samsung, Hynix, Kioxia, Micron, and SanDisk, with a CR5 market share exceeding 90%;
3) Demand Side: The main downstream applications for storage are consumer electronics such as mobile phones and PCs, which inherently have cyclical properties.
3. Investment Logic: Price Increases Expected, Domestic Substitution
1) Structural Opportunities from DDR4 Phase-Out: As DDR4 gradually exits the market, the global storage chip market enters a new development stage. The phase-out of DDR4 has led to spot shortages and continuous price increases, providing market space for next-generation storage products like DDR5/LPDDR5. DDR5/LPDDR5 and other next-generation storage technologies will become mainstream in the market. Manufacturers like Micron, Samsung, and SK Hynix have increased their investments in advanced processes such as DDR5 and HBM, driving the industry towards higher performance and higher density.
2) Growth in Demand for AI Edge Devices: The proliferation of AI edge devices (such as AI glasses, AI phones, and AIPC) has further driven the demand for storage chips. By the second quarter of 2025, the penetration rate of AI edge devices is expected to continue to rise, leading to simultaneous growth in storage chip prices and sales.
3) Continuous Price Increases for High-End Storage Products: Prices for high-end storage products such as HBM, NAND Flash, and DDR5 continue to rise, becoming an important driving force for industry growth. In the second quarter of 2025, global DRAM industry revenue is expected to reach $22.9 billion, a quarter-on-quarter increase of 24.8%, indicating a sustained improvement in industry prosperity.
4) Ongoing Promotion of Domestic Substitution: As DDR4 capacity decreases, domestic storage chip companies are expected to capture a larger share in niche markets. Policy support for domestic substitution continues to promote local companies to enhance their technological levels and market competitiveness.
4. Investment Summary
The storage industry is currently driven by AI, with potentially stronger sustainability. Since 2016, the storage industry has experienced three cycles.
1) The core benefit of the 2016-2019 cycle was the rapid price increase brought about by the transition to DDR4. Although there was no significant growth in sales of consumer electronics such as mobile phones and PCs, the popularity of applications like mobile gaming raised the demand for storage performance in hardware, significantly increasing the penetration rate of DDR4. In 2016, storage manufacturers shifted to expanding 3D NAND Flash production, deepening market expectations for tight DDR4 supply. Additionally, factors such as power outages at Samsung’s Xi’an factory in 2016 further pushed up storage prices.
2) The core benefit of the 2020-2023 cycle was the demand for consumer electronics such as laptops and mobile phones. In 2020-2021, as the global pandemic led to the widespread adoption of remote work and online classes, laptop and mobile phone sales surged, with laptop shipments increasing by 27% in 2020. Furthermore, the construction of global data centers increased the demand for servers, with global server shipments growing by 3.9% and 6.9% in 2020 and 2021, respectively. However, in 2022-2023, consumer electronics sales declined, leading to a downturn in storage prosperity.
3) The new cycle starting in 2024 will benefit from the demand growth brought about by AI infrastructure. We believe that the current upward cycle in the storage industry differs from the previous two cycles, as the latter two relied more on consumer demand, while the current demand for storage chips is primarily driven by large technology companies’ computing infrastructure in the AI era, suggesting potentially stronger sustainability. In 2025, the global storage chip industry will undergo significant changes, with the phase-out of DDR4 marking the end of an era, while the rise of DDR5 heralds new opportunities. Driven by policy support, market demand, and technological upgrades, the storage chip industry will enter a new growth cycle. Investors should focus on cyclical price increases, domestic substitution, technological upgrades, and AI applications to seize future development opportunities in the industry.
5. Overview of Related Industry Chain Companies
▶ Dawei Co., Ltd.: Storage Chips + Minor Metals + Robotics + Autonomous Driving; the semiconductor memory business accounts for about 92%, with its subsidiary Dawei Chuangxin Microelectronics primarily producing NAND and DRAM storage series, covering DDR3, DDR4, LPDDR4X commercial/wide temperature level, DDR5, and other DRAM products. On June 5, 2025, the company announced that its wholly-owned subsidiary’s feldspar mine resource reserves passed the review and filing, with the filed resource feldspar ore amounting to 20.9533 million tons, Li20 (lithium oxide) mineral amounting to 323,700 tons, WO3 (tungsten trioxide) mineral amounting to 65,500 tons, and Sn (tin) mineral amounting to 14,100 tons, along with associated lithium, tungsten, tin, and other non-ferrous metals. The affiliated company Dawei Hongde Automotive is engaged in the R&D of technology related to new energy special vehicle control chassis and autonomous driving, and can also provide comprehensive autonomous driving solutions for closed locations such as ports and mines.
▶ China Electronics Port: Storage Chips + NVIDIA + Distribution Leader + State-Owned Enterprise; according to the prospectus and the annual report dated April 29, 2025, the company represents global leading storage chip brands such as Micron and Yangtze Memory Technologies, making it the largest electronic component distributor in the domestic market. As of August 29, 2025, the company is an authorized distributor for NVIDIA in China, representing Jetson and automotive chips used in AI scenarios such as robotics and autonomous vehicles. According to the semi-annual report dated August 27, 2025, the company achieved revenue of 33.526 billion RMB in the first half of 2025, a year-on-year increase of 35.64%, with net profit attributable to the parent company also showing year-on-year growth; according to the company’s equity structure and the credit rating report dated October 20, 2025, the ultimate controller of the company is the State-owned Assets Supervision and Administration Commission of the State Council, indicating a state-owned enterprise background, and it has ranked first among domestic electronic component distributors for many years.
▶ Haoshanghao: Huawei HiSilicon Agent + Chip Distribution (Storage Chips) + Robotics Semiconductor Chips + AI Glasses; according to information from the HiSilicon official website, the company’s subsidiary Tianwu Technology is an agent for HiSilicon. The storage chips currently sold by the company mainly include DRAM, eMMC, and FLASH from brands such as GigaDevice and Jiangbolong. The company’s main business is electronic component distribution, with storage being one of its primary business directions. The subsidiary collaborates with Cloud Deep Technology to provide advanced semiconductor chips and corresponding technical support for applications in robotic joints and drives, with the collaboration still in the early stages of business development. On May 22, 2025, during an institutional survey, the company indicated that the SoC and wireless products it represents can be applied to the AI glasses market and other peripheral products. The company has developed a TWS smart glasses solution based on TWS Bluetooth chips, supporting features such as AI voice, with the project progressing to mass delivery. The electronic rearview mirror solution developed based on the Xingchen automotive chip has entered the verification stage.
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