"AI" storage capacity "siphoning"! Fear of pressure on the smartphone industry Qualcomm (QCOM.US), Arm (ARM.US) fell after their earnings.

After the earnings release on Thursday, both Qualcomm (QCOM.US) and Arm (ARM.US) saw a significant drop in their stock prices, as the market is concerned that the shortage of storage chips will inhibit the growth prospects of the electronics industry. The signal sent by Qualcomm's management, the world's largest smartphone processor manufacturer, indicates that the shortage of storage chips will limit phone production. A significant portion of Arm's revenue comes from the licensing fees for its technology in the smartphone industry. The historic construction boom of artificial intelligence (AI) infrastructure is exacerbating the shortage of storage chips. Storage chips are used to help computers manage data, and component manufacturers - including Samsung Electronics, SK Hynix, Micron Technology, Inc. - are focusing their production on supplying AI data centers, reducing capacity for end products such as phones. This means that the quantity of products reaching consumers will decrease, and consumers will have to pay higher prices. Qualcomm CEO Cristiano Amon stated in a call with analysts, "Across the industry, the shortage and rising prices of storage chips are likely to determine the overall scale of the phone industry." Amon pointed out that some customers have already indicated that they will reduce their planned phone production due to the inability to obtain enough storage chips. On the other hand, both Qualcomm and Arm are expected to benefit from the AI trend. These two companies are adjusting strategies to generate more revenue from data center operators - a transformation that should be beneficial for their long-term development. However, they are still vulnerable to fluctuations in the smartphone market. A positive factor is that phone manufacturers are prioritizing the production of high-end models with higher prices. This helps boost sales of Qualcomm's high-end chips and supports Arm's licensing revenue. Other companies have also warned of the tense situation regarding storage chips. Taiwan-based chip maker MediaTek mentioned this issue during a call this week, calling it an "evolving" situation. Meanwhile, Intel Corporation CEO Pat Gelsinger stated on Tuesday that the shortage of storage chips could continue for several years. He said, "As far as I know, there is currently no sign of relief." He cited suppliers indicating that the situation may not improve until 2028. It is worth mentioning that in the face of the increasing demand for storage chips due to the rapid development of AI, some storage chip manufacturers have already initiated intensive expansion and cooperation actions, increasing capital expenditure in 2026 is a common trend. On January 16, Micron Technology, Inc. announced the groundbreaking of its advanced storage chip manufacturing campus in New York State, planning to invest a total of $100 billion, potentially constructing four semiconductor plants, making it the largest semiconductor factory in the United States. This is part of Micron Technology, Inc.'s continued expansion in the US, with an overall vision of investing $200 billion in the US, building multiple semiconductor plants, with the goal of eventually producing 40% of DRAM in the US. On January 17, Micron Technology, Inc. announced a cash acquisition of the Tognpi P5 manufacturing plant in Copper Lu Village, Taiwan, for $1.8 billion, aimed at enhancing Micron Technology, Inc.'s storage supply capabilities. Additionally, the company announced a strategic partnership with TSMC, with TSMC providing wafer packaging and processing services to Micron Technology, Inc. On January 26, Micron Technology, Inc. announced the groundbreaking of its advanced wafer manufacturing facility in Singapore, planning to invest approximately $24 billion over 10 years to meet NAND demand related to AI. Singapore is also a key market for Micron Technology, Inc.'s investment in Asia. The company's previously announced HBM advanced packaging facility is also located in the same manufacturing campus in Singapore and is expected to begin supply in 2027. The company expects synergy between its NAND and DRAM production from these investments. SK Hynix's stance appears to be more cautious. The company's executives mentioned, "Capital expenditure is expected to increase significantly in 2026, but capital expenditure discipline will still be maintained." In the case of supply-demand imbalances, the company stated it will prioritize meeting customer needs by strengthening partnerships. To this end, SK Hynix plans to maximize the capacity of its M15X plant in Cheongju, South Korea, and the advanced packaging semiconductor plant in Indiana, USA is proceeding as planned. The company also plans to build its first factory in the Longin Semiconductor Cluster in South Korea to ensure stable medium to long-term production capacity. However, from the start of production/expansion to actually achieving capacity, the cycle is relatively long. For new factories, it typically takes 18-24 months from purchasing new equipment to achieving mass production, so even if new capacity construction starts in the second half of 2025, effective supply will not be available until 2027, making it difficult to fill short-term supply gaps. In addition, even as top storage manufacturers actively expand capacity, their focus remains on products that address the needs of AI infrastructure. By comparison, consumer electronics such as phones and PCs may continue to face price increases for some time. The latest analysis from the UBS Group AG analyst team indicates that, in the current background of continuous expansion of AI data centers, the global storage industry is showing significant structural differentiation, with a "meaningful supply relief" expected at the earliest around 2028. Before that, the structural demand brought about by the construction of AI data centers will continue to strengthen the vibrancy and bargaining power of the storage chip industry chain. Nomura analysts predict that this "super cycle" in the storage industry, which began in the second half of 2025, will last at least until 2027, and significant additional supply will not appear until early 2028 at the soonest.