The price of storage chips will rise.

In 2023, the storage industry went through the entire year, transitioning from "destocking" to "restocking." Coupled with the increased demand for high-frequency high-bandwidth memory (HBM) due to AI high-speed computing, international giants such as Samsung and SK Hynix gradually recovered their utilization rates. Looking ahead to 2024, industry insiders estimate that the expansion of production capacity by major manufacturers will still be restrained, and storage prices will continue to rise.

According to industry sources, from November to December 2023, driven by the replenishment of inventory for PCs and smartphones, SK Hynix and Intel raised the utilization rates of their DRAM and NAND Flash factories, respectively.

The production volumes of DRAM and NAND Flash from Samsung and SK Hynix also rebounded in the fourth quarter of 2023 to the peak levels of the fourth quarter of 2022. However, despite the increase in utilization rates, product prices have not yet returned to cost levels.

Research and consulting firms estimate that the capital expenditure for DRAM in 2024 will be similar to that of 2023, while NAND capital expenditure will be about 7% to 9% lower than in 2023, with no significant expansion in production capacity.

As of the fourth quarter of 2023, the utilization rates for DRAM and NAND were only 75% to 80% and 60% to 65%, respectively, compared to the peak levels. Original equipment manufacturers' capital expenditures will mainly be used for expanding the 1b/1c nm processes and meeting the demand for HBM/200L 3D NAND.

Industry insiders point out that storage prices have recently stabilized mainly due to the seasonal slowdown in demand and a sluggish trading market. However, major manufacturers, despite facing losses, are determined to raise prices. Therefore, it is expected that the upward trend in storage prices will continue until they return to cost levels.

The demand for mobile phone inventory in mainland China is strong, leading TrendForce to revise its outlook for storage prices related to smartphones in the first quarter of 2024. The estimated increase for Mobile DRAM has been adjusted from 8% to 13% to a range of 18% to 23%. Similarly, the forecasted increase for eMMC/UFS has been raised from 5% to 10% to a range of 18% to 23%, illustrating this trend.

Recently, both DRAM and NAND flash prices have experienced their first increase in over two years, seemingly confirming this viewpoint. Looking at bulk transaction prices for 8GB DDR4 memory, a key indicator of market trends, the unit price is around $1.65, representing an 11% increase compared to the previous period. This marks the first price increase for this product since June 2021.

In the NAND product category, the 256Gb TLC, another market indicator, has a unit price of around $1.85 in the fourth quarter, reflecting a 12% increase compared to the third quarter. This also represents the first increase for this product since the third quarter of 2021.

Starting from the second half of 2022, major storage manufacturers such as Samsung, SK Hynix, and Micron significantly reduced production to lower inventory levels and control the downward trend in market prices. Now, it seems that these efforts are finally showing "results," and the willingness to raise prices is very strong.

A procurement manager from a PC manufacturer revealed, "If the other party says 'the price is too low and we can't supply,' we can only accept a certain price increase."

According to a recent report by Morgan Stanley, storage chip price increase expectations have been raised again. The report indicates that the current market supply and demand situation is presenting a scenario of high demand and low supply. Downstream customers have started replenishing inventory, with significant increases expected in orders for the first quarter of the next year from Chinese smartphone OEMs and computer ODM/OEMs. Morgan Stanley's latest estimate is that DRAM and NAND prices will rise by 20% in the first quarter of next year, doubling the previous expectations. The earlier forecast was an increase of 8% to 13% for DRAM prices and 5% to 10% for NAND prices.

Among these, the replenishment of inventory by smartphone manufacturers will lead to price increases, and inventory levels will return to normal (Mobile DRAM requires 4 to 6 weeks, NAND requires 6 to 7 weeks). On the supply and demand front, after significant production cuts and active destocking by storage chip manufacturers, production is far below demand. With the improvement in demand, next year's price increase prospects will become clearer. The demand for artificial intelligence will further boost storage chip prices. Morgan Stanley pointed out, "We also need to consider the impact of the $10 billion market size growth in HBM chips next year and the sudden emergence of AI demand, which will prolong supply shortages." Additionally, although most AI applications are deployed in the cloud, starting from 2024, edge computing demand will become more common (Mobile AI) and may gradually enter the smartphone upgrade cycle.