The chairman of memory module maker Transcend, Shu Chongwan, stated that the DRAM and NAND flash markets are currently experiencing a severe shortage, primarily driven by a surge in AI-related demand. He expects the tight supply situation will be difficult to alleviate within this year.
Speaking at an investor conference on Wednesday, Shu Chongwan pointed out that DDR5 prices in the second quarter have risen 40%-50% compared to the first quarter, and procurement demand still cannot be fully met. He emphasized that market rumors suggesting memory prices are easing do not align with the actual supply situation from manufacturers like Samsung and Micron. The current supply gap is significant, with customers almost daily requesting deliveries. Shu Chongwan stated clearly, "The supply gap for DDR4 is getting larger, and the supply gap for flash memory will certainly get larger as well." Facing the supply shortage, Transcend has adopted a strategy of selectively supporting customers and cannot meet the demands of all clients. For downstream manufacturers reliant on memory module supplies, procurement pressure will continue to accumulate.
Despite market talk of some suppliers expanding production, Shu Chongwan believes this will not be enough to ease the recent supply-demand imbalance. He noted that major DRAM manufacturers like Samsung, Micron, and SK Hynix are unlikely to complete capacity expansions within the next year, citing lengthy construction cycles—Samsung has previously indicated that building a new fab takes at least two years, while lead times for some critical equipment have stretched to a year and a half. This implies that meaningful production increases from US and European manufacturers in the short term are highly unlikely. Regarding the expansion plans of Chinese memory manufacturers, Shu Chongwan expressed that significant output this year is unlikely. While there are many market rumors about next year's capacity, their "authenticity is difficult to judge." Based on information from suppliers, he concludes that the shortage conditions for both DRAM and NAND flash are unlikely to improve this year.
Shu Chongwan attributed the root cause of this extreme shortage to the rapid expansion of AI demand. He explained that the rise of AI means any device equipped with a CPU inevitably requires DRAM and flash memory. Simultaneously, edge AI and automation equipment are also competing for memory resources, leading to a widespread scramble for supplies. He believes DRAM and flash memory have been in an extreme shortage since last September, with AI demand being a key driver. Memory demand from industrial automation and embedded applications is also gradually increasing, further intensifying the supply-demand矛盾. Regarding the possibility of using technical means to reduce memory requirements, Shu Chongwan considers the effect limited. He noted that the introduction of HBF technology will increase, not replace, the demand for flash memory, and its application scenarios differ from HBM.
Regarding NAND flash product structure, Shu Chongwan disclosed that SLC is no longer used in Transcend's product mix, MLC accounts for about 10%, and TLC makes up about 90%. Notably, major MLC suppliers Kioxia and SanDisk have successively announced exits or discontinued MLC products, which is expected to make supply in this segment even tighter. In response, Transcend has taken preemptive action. Shu Chongwan said the company completed its "final procurement" last year for MLC products used in industrial applications, securing sufficient inventory from manufacturers like Samsung and SanDisk to meet demand through the end of this year, ensuring supply for existing customers remains unaffected.
In terms of procurement strategy, Shu Chongwan emphasized that Transcend's business model involves dealing almost exclusively directly with manufacturers, avoiding participation in the highly volatile spot market to mitigate risks associated with secondary, grey market, or downgraded products. He pointed out that while prices also increase when dealing directly with manufacturers, the supply is more stable, and price adjustments occur over longer cycles—monthly or quarterly—rather than fluctuating daily. Shu Chongwan also mentioned that the company has long-term agreements with suppliers, but even these cannot guarantee complete supply fulfillment under the current extreme shortage conditions. He explicitly stated his disapproval of seeking speculative profits and said the company will continue focusing on enhancing service value, production efficiency, and management performance. Facing supply pressures, downstream customers have widely adopted down-specification strategies, such as switching from 16GB to 8GB memory or reducing storage from 256GB to 128GB, to control procurement costs.
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