There is something that worries us even more

Ban-Seng Teh, Seagate’s commercial director, has put on the table in statements that SCMP has been published What are we facing if we stick to the current memory crisis: “It is difficult to know if it will last forever (…) The current cycle is very unusual because in the past we went through cycles of shortages and excess supply.” As we have explained to you in other articlesthe sharp rise in the price of memory chips is due to the very high demand for this class of semiconductors from data centers for artificial intelligence (AI).

Nothing seems to indicate that this demand is going to relax in the medium term, so it seems reasonable to assume that the cost of memory will most likely not reduce as soon as users would like. However, a very important idea emerges from Ban-Seng Teh’s statements that are worth not overlooking: the expansion of data centers for AI has the capacity to cause increases in the price of memory and storage chips to be more frequent and structural. In this context they would stop responding to temporary market cycles.

“The new semiconductor cycle” is approaching

Historically, the market for DRAM memories and NAND storage chips has behaved like a real roller coaster. In periods of high demand, prices rose and factories were forced to produce more. Some time later there was usually an excess supply that caused prices to plummet and manufacturers decided to moderate their production capacity. This cycle of successive growth and decline has described market behavior for decades, but AI has the ability to end this pattern once and for all.

And it requires a type of memory, known as HBM (High Bandwidth Memory), which currently only three companies produce on the entire planet: the South Korean Samsung Electronics and SK Hynix, and the American Micron Technology. Several Chinese companies, such as CXMT (Changxin Memory Technologies), are investing very aggressively to create HBM memory supply chains independent of Western influencebut for now these chips are only in the hands of the three companies that I mentioned a few lines above. An interesting note: CXMT hopes to launch its first HBM3E chips in 2027.

The outlook for AI hardware manufacturers is desperate. So much, in fact, that NVIDIA has publicly asked HBM memory producers to build more factories, assuring them that it will buy all the production they are capable of generating. At this juncture SK Hynix, Samsung and Micron they have decided to sacrifice a part of its conventional DRAM memory production capacity with the purpose of dedicating more resources to the manufacture of HBM chips for AI.

Presumably the demand for these latest integrated circuits will be persistent and massive, so the market will hardly reach saturation stocks that has cyclically occurred in the field of DRAM memories. And the main consequence of this behavior will be that prices will be consistently high.

Image | Generated by Xataka with ChatGPT

More information | SCMP

In Xataka | While the US tries to stop it at any price, the Chinese industry exports more chips than ever: it has AI in its favor