Guotai Haitong: original factory launches price hike, second-quarter storage chip contract price increase higher than expected.

Guotai Haitong released a research report, stating that according to the April report of DRAMeXchange, the average price of general NAND (128Gb 16Gx8 MLC) has increased by 9.61% on a month-on-month basis; in terms of DRAM, downstream brand factories in Q1 have mostly shipped early in response to changes in the international situation, which helps to reduce inventory in the DRAM supply chain. It is expected that the prices of general DRAM and HBM-included DRAM in Q2 will increase by 3-8% on a quarterly basis (previously, the expected price decline for general DRAM in March narrowed to -0-5%). At the beginning of 2025, all major manufacturers will take more decisive production reduction measures, reducing the annual production scale and effectively lowering the supply bit growth rate, which is conducive to rapidly alleviating the pressure of market supply-demand imbalance and laying the foundation for price rebound. The main points of Guotai Haitong are as follows: - It is expected that the increase in contract prices of storage chips in the second quarter will be higher than previously expected in March, with all manufacturers opening price increases. - According to TrendForce, NAND Flash manufacturers have gradually reduced production since the fourth quarter of 2024, and the effects are gradually becoming apparent. In addition, consumer electronics brands have responded to changes in the international situation by producing early, driving demand, coupled with the rebuilding of inventory in applications such as PC, smartphones, and data centers, it is expected that the Blended NAND Flash prices in Q2 of 2025 will increase by 3-8% (previously expected to increase by 0-5% in March). From the perspective of specific quotations from manufacturers: 1) Micron announced a price increase on March 25, and demand in the memory business sector has shown unexpected growth; 2) SanDisk announced a price increase of over 10% on all its channels and consumer products starting in April; 3) Samsung Electronics is currently negotiating with major global customers to raise the prices of storage chips, proposing a price increase range of 3-5%. On the supply side, production cuts by storage manufacturers are alleviating the market's supply-demand imbalance pressure. At the beginning of 2025, all major manufacturers will take more decisive production reduction measures, reducing the annual production scale, effectively lowering the supply bit growth rate, which is conducive to rapidly alleviating the pressure of market supply-demand imbalance and laying the foundation for price rebound. The market supply-demand structure of storage chips is expected to significantly improve, including production cuts by manufacturers, inventory reduction in smartphones, AI, and other factors that will drive demand growth, thereby easing the situation of oversupply. On the demand side, AI+ storage promotes significant increase in terminal machine capacity. In 2024, the average capacity of DRAM and NAND Flash in various AI extended applications, such as smartphones, servers, and laptops, has grown. In 2025, with further penetration of AI applications, the average capacity of storage in terminal machines will continue to grow, and the demand for storage terminals is expected to see a comprehensive increase along with AI+ applications. 1) AI smartphones: DeepSeek's cost reduction and open source are expected to boost end-side computation and storage configuration, and end-side collaboration is expected to see a significant enhancement; 2) AI PCs: DeepSeek can help B-end private cloud deployments of local large models, reducing data leakage risks by processing data on local devices, and C-end users will also strengthen their deployment intentions locally, reshaping the growth logic of AI PCs gradually; 3) AIoT: End-side applications are expected to blossom, and the penetration of AR glasses will further strengthen; 4) Automotive intelligence: Intelligent vehicles are expected to introduce open-source large models to become larger AIoT terminals, and AI may deeply empower the entire lifecycle of automotive. Risk warning - The price recovery of storage terminals is lower than expected; AI application penetration is lower than expected.