Memory market, a once-in-a-century event.

The surge in memory prices has become an accepted fact, but hearing it from Apple Inc. CEO Tim Cook adds a sense of gravity to the outlook for such products in the consumer market. During a financial earnings call on July 30, Tim Cook informed analysts that Apple's memory costs for the September quarter would exceed those of the June quarter. Previously, the increase in memory costs had fully offset the sequential decline in Apples adjusted gross margin. Cook made these remarks in Cupertino, marking his last earnings call before John Ternus takes over as CEO. Cook described the current memory price environment as like a once-in-a-century flood. In fact, recent statements from manufacturers suggest that storage has profoundly impacted mobile phones. The Rise in Memory Prices is Affecting Smartphones As a leading supplier of mobile SoCs, Qualcomm was the first to signal this trend. Qualcomm (QCOM.US) CEO Cristiano Amon stated in a media interview on Wednesday that the company is taking concrete steps to expand its profit margins moving forward, including a comprehensive increase in chip prices starting September 1 (most of which are sold to smartphone manufacturers) and seeking other ways to streamline the company's supply chain. Costs are up, and prices will continue to rise, Amon said. QUALCOMM Incorporated noted in a press release, The costs of inputs in the semiconductor industry are rising across the board, including wafer manufacturing, assembly, testing, advanced packaging, memory, and other materials. However, as management pointed out, revenues are still maintaining healthy growth. Amon mentioned that the dynamic changes in the smartphone market have led to a decrease in the competitiveness of mid-range and entry-level phones, primarily due to price factors. He also pointed out that even high-end Android phones, where Qualcomm chips dominate, are facing consumer demand for lower prices. Due to rising memory prices, consumer preferences in the high-end phone market are changing; they are leaning towards more affordable premium models or last years models, Amon said. Apple Inc. (AAPL.US) CEO Cook also indicated that memory market prices will continue to rise after September, which could further impact Apple Inc.s business. Eric Woodring from Morgan Stanley asked if Apple plans to enter long-term agreements with suppliers for multi-year, pre-approved pricing. Cook responded to the latter part of the question regarding pricing philosophy, without addressing the agreement aspect. When asked if the purpose of Apple's push for procurement flexibility is to ensure sales or to maintain prices, Cook stated that there are currently three suppliers in the DRAM market, and increasing the number of suppliers could help alleviate supply shortages and possibly bring down prices. However, he later said the impact on pricing remains unclear. He indicated that Apple is evaluating all options. Counterpoint Research previously pointed out that due to the rising memory costs, global smartphone SoC shipments are expected to decline by 15% year-on-year in the first half of 2026. In the first half of 2026, the shipments of MediaTek and Qualcomm chips are projected to fall by over 25% year-on-year. Meanwhile, Apple Inc., Samsung, Alphabet Inc. Class C, and Unisoc all managed to achieve robust growth in chip shipments during this period for the reasons detailed below. Counterpoint Senior Analyst Shivani Parashar commented on the dynamics among smartphone SoC manufacturers: Apple Inc.'s market share grew by 4% in the first half of 2026 compared to the first half of 2025, mainly due to the strong performance of the iPhone 17 series. On the other hand, Qualcomm and MediaTek saw declines in their market shares, albeit for different reasons. Qualcomms high-end market growth is limited because the Samsung Galaxy S26 series uses both Snapdragon 8 Elite Gen 5 and Samsungs own Exynos 2600 processorswhereas its predecessor exclusively used Qualcomm chips. Weak sales of the Xiaomi 17 series also exacerbated the pressure on Qualcomms high-end chip shipments. Meanwhile, the low-end and entry-level 5G chipset offerings from MediaTek have been impacted by the ongoing memory crisis, but its high-end 9500 series has performed well through partnerships with manufacturers like vivo, OPPO, Pocophone, and Redmi. Parashar further added, Many entry-level smartphone models are transitioning to Unisoc's 4G platform to reduce bill of material costs, which will help propel Unisoc's growth in the first half of 2026. Furthermore, Unisoc has made significant strides in 5G applications through partnerships with Pocophone and Redmi. Counterpoint revealed that smartphone memory prices soared over 300% year-on-year in Q2 2026, prompting OEM manufacturers to actively sign long-term supply contracts to cope with memory shortages or profit from it while expanding their market share. Thus, the rising equipment costs are primarily driven by memory price hikes instead of upgrades in hardware specifications. Performance of Memory Chip Manufacturers Continues to Soar While the rising memory prices are causing headaches for many, the performance of memory manufacturers continues to surge. First, let's look at SK Hynix (SKHY.US), which reported a year-on-year revenue increase of 257% and an operating profit increase of nearly 557% for the quarter ending in June. Compared to the previous quarter, revenue grew by 51%, and operating profit increased by 61%. The company noted that the demand continues to grow alongside expanding investments in artificial intelligence infrastructure, with high-performance products for AI servers driving prices to record highs. It marked the first time in its history that the cumulative revenue for the first half of the year exceeded 100 trillion won, underscoring the strong demand in the AI market. SK Hynix expects its capital expenditures for the year to exceed 40 trillion won and plans to continue its development based on its American Depositary Receipts (ADRs) that debuted on Nasdaq earlier this month. The company emphasized prioritizing investment in growth while ensuring a robust financial structure. Additionally, it will continue to review its shareholder return policy. Looking ahead, the company aims to maximize output utilizing existing manufacturing centers in Icheon and Yongin, while boosting NAND flash production and advanced packaging technologies in Cheongju. Josh Gilbert, chief analyst for eToro in the Asia-Pacific region, stated that the companys gross margin of 83% indicates its pricing power remains strong. This is not something that exists in a market where demand is shrinking; such a scenario only arises when companies are competing for supplies, he said. Next, looking at Samsung, spurred by AI, Samsung Electronics reported an operating profit of 89.49 trillion won ($62 billion) in Q2, a 19-fold increase, marking an all-time high. The demand for AI-driven high-bandwidth memory has pushed prices up and tightened chip market supplies. The companys second-quarter revenue reached 171.5 trillion won, up 130% year-on-year, with net profit reaching 71.62 trillion won, a year-on-year increase of 1299.9%. The company stated that the demand for AI servers is a key driver behind its memory business achieving record profitability, also aiding its DRAM and NAND flash sales to reach historical highs. These chips are widely used in various electronic devices, from smartphones to automotive systems and servers. Samsung also mentioned that as it increases its capital expenditures on its new Pyeongtaek factory and other infrastructure projects to meet AI demands, its semiconductor capital expenditurehas surged sequentially while continuing to invest in advanced research and development. The company has expanded its sales scale of HBM4 and delivered the industry's first HBM4E samples to major clients. HBM4 is Samsungs sixth-generation high-bandwidth memory, designed to power advanced AI processors, including NVIDIA Corporations Vera Rubin platform. Samsung stated that demand for general computing and AI is growing exponentially, and the company is closely monitoring the relative speed of demand for HBM and server DRAM while maintaining an optimal product mix to support long-term demand for AI. The company expects supply constraints in the industry to persist next year and stated that it will manage its HBM and DRAM business in a balanced manner to align HBM market share with its traditional DRAM operations. With the wide application of intelligent AI, the company anticipates strong server memory demand in the second half of the year, and AI infrastructure capital expenditure is expected to continue rising. Kioxia Holdings predicted on Friday that its quarterly net profit will grow 31-fold, driven by strong demand from AI data centers. The Japanese memory chip supplier expects its net profit for the July to September quarter to reach 1.27 trillion yen (approximately $7.91 billion), up from 40.6 billion yen in the same period last year. Kioxia reported a net profit of 842.1 billion yen for the April to June quarter, which represents a 46-fold increase compared to the same period last year, although slightly below previous expectations. Operating profit surged 28-fold to 1.27 trillion yen, with revenue growing fivefold to 1.76 trillion yen. The robust performance is attributed to the increased demand for NAND flash (Kioxias core product), as American tech firms continue to expand data center capacity. Both prices and shipments rose, with the company's average selling price for the April to June period up 70% compared to the previous quarter. Notably, sales to data centers and other clients during the April to June quarter grew 5.4 times year-on-year, reaching 1.17 trillion yen. In just three months, such sales have roughly equaled the total amount for the entire previous fiscal year ending in March. Kioxia indicated that driven by the demand from data centers, the growth in NAND flash demand is expected to continue this quarter. We are still in the early stages, and I believe the real growth has yet to come, Kioxia stated. Will Memory Enter a Cycle Again? Although performances are soaring, they seem not to satisfy investors. For instance, both SK Hynix and Samsung saw their stock prices plummet on the day of their earnings announcements. Afterwards, SK Hynix's stock closed nearly 30% higher, marking the best single-day gain in history. Samsung's stock closed nearly 27% higher, also achieving its highest single-day gain. Similar situations happened with Kioxia and SanDisk. Kioxias stock price has dropped over 60% from its historic high on June 22, affected by a broader sell-off of AI-related stocks and growing skepticism about the sustainability of consumer enthusiasm. As for SanDisk, from its closing high on June 25, the company saw its stock decline 56.49% by July 29. Although it rebounded by 25.99% on July 30, the companys stock is still within a substantial growth cycle this year, but this does not prevent it from being one of the worst-performing components of the S&P 500 for the month. Regarding the future of memory, Samsung believes shortages will continue until 2029. Both Samsung, SK Hynix, and Micron have disclosed that they have signed many long-term agreements with companies, with Micron even entering similar agreements with automotive manufacturers. However, the historical cyclicality of memory hangs over all manufacturers like the sword of Damocles. Some analysts believe this time might be truly different. On one hand, this wave of rising memory prices has persisted for four years with no signs of demand decline; on the other hand, investments in AI infrastructure keep hitting new highs. Moreover, memory has transitioned from being a generic product to an era of customization. For example, the emergence of customized HBM and 3D DRAM stacking is ushering memory into a distinctive new era. As a prominent institution, Nomura, in its latest DRAM forecast, has elevated this product, historically known for its cyclicality, to another level. They expect DRAM revenue to grow from about $80 billion in 2022 to an astonishing over $2.06 trillion by 2030. Heres the complete supply-demand outlook they released. Production is expected to grow from 29.3 billion GB in 2022 to 128.4 billion GB by 2030. Shipments are projected to rise from 24.7 billion GB to nearly 126 billion GB. Utilization rates are expected to remain extremely high, often exceeding 100% in later years, with inventories even turning negative in absolute terms. This indicates a clear signal of structural market tightness. The price trend is equally dramatic. After a sharp decline in 2023 to $1.90 per GB, Nomura expects a strong rebound. They predict prices will reach $13.70 per GB by 2026, peak at near $18.60 per GB in 2027, and then stabilize around $16 to $17 per GB before 2030. The combination of higher shipments with these persistently high average selling prices is the key to driving that revenue figure over $2 trillion. This is not a normal cyclical recovery. The forecast assumes that AI and data center demand will be years ahead of supply. Wafer capacity is increasing, but its still far from matching the pace of bit demand. High Bandwidth Memory, or HBM, is the main driver here. It brings higher density, higher prices, and profitability far exceeding that of standard commodity DRAM. For context, most mainstream long-term forecasts still posit that the entire DRAM market will remain below $300 billion to $400 billion by 2030. Nomura is essentially saying that if AI infrastructure spending continues to progress at the current pace, this market could be 5 to 7 times larger than those conservative estimates. This has huge implications for the three giantsSamsung, SK Hynix, and Micron. If even part of this comes true, memory chips could become one of the largest profit pools in the entire semiconductor industry. The old notion of DRAM as a purely commodity cycle is being thoroughly rewritten by AI. What does everyone think about this? This article is reproduced from the WeChat public account "Semiconductor Industry Observation," with editing by Xu Wenqiang.