JP Morgan: HBM specification downgrade does not change the underlying shortage; demand CAGR still reaches 63% from 2026 to 2028.

J.P. Morgan recently released an HBM memory industry research report, updating its views on industry supply and demand, downstream demand, technology iteration, vendor competition, and investment judgment in response to market concerns over HBM specification downgrades. The bank believes that even if specification downgrades occur, HBM supply and demand will remain persistently tight, with the HBM bit demand CAGR still reaching 63% from 2026 to 2028, the price uptrend continuing, and the memory sector offering investment value. On the supply-demand front, the report raises 2026-2027 HBM demand and lowers 2028 demand, with the cumulative three-year bit demand essentially unchanged at 163 billion Gb. Affected by the rising share of 8Hi economy products and the earliest deferral of 16Hi technology to 2029, the industry will remain in a supply shortage state throughout 2026-2028, with the supply-demand tightness ratio improving slightly from -20% to -16% and the cumulative duration of shortage continuing to rise. On the supply side, supply is slightly boosted mainly by Samsung increasing HBM wafer allocation. The HBM market size is expected to reach $160-282 billion in 2027-2028, accounting for 18-24% of the three major memory makers' total DRAM revenue. In terms of capacity, 58% of new DRAM capacity from 2025 to 2028 will be directed toward HBM manufacturing, with HBM's share of total DRAM capacity rising from 19% to 31%. The downstream customer landscape will undergo an important shift, with ASIC custom chips surpassing Nvidia to become the largest HBM consumer in 2027. In 2026, Nvidia remains the core buyer, accounting for 58% of total demand; however, ASIC system shipments can grow 102% year over year, far above Nvidia's 15%. In 2027, ASIC's demand share rises to 48%, while Nvidia falls back to 43%, though Nvidia's per-chip HBM content remains higher than ASIC's, with the capacity premium between the two gradually narrowing. On the price and profitability side, HBM average selling prices rise 54% year over year in 2027 and continue to rise 25% in 2028, with the per-Gb price reaching $3.8 in 2028. HBM operating margins remain in the mid-60% to 70% range, lower than server DRAM under long-term agreements, but substantially improved versus prior years, with prices and margins for non-long-term-agreement products expected to continue rising through 2028. On the technology roadmap, the industry is moving toward multi-SKU tiering, with 8Hi as an economy product seeing its lifecycle extended, 12Hi targeting the high-performance market, TCB as the mainstream packaging solution at this stage, and customized HBM becoming the focus of future competition, with Nvidia's NVHBM customized product expected to launch by end-2028. Regarding the vendor competitive landscape, Samsung and Micron continue to catch up with SK Hynix, with their combined HBM revenue share reaching 59% in 2027. In a tight-supply environment, competition will not suppress average product prices. Custom chips developed by AI labs such as OpenAI and Anthropic represent an unpriced long-term demand upside variable. On the investment front, the report is bullish on the memory sector, with the market having partially digested the negative news of specification downgrades; supporting logic includes tight HBM supply and demand, value enhancement from customization, and price resilience. Share prices have rebounded notably after an earlier pullback; based on shareholder return potential, SK Hynix is preferred, and if Samsung increases dividends and buybacks, its investment value will improve further.