Artificial intelligence is triggering a severe structural shortage in the global NAND Flash storage market. Phison Electronics CEO Jiancheng Pan stated in a recent media interview that the future does not belong to those who control tokens, but to enterprises with ample storage capacity, which can generate endless revenue.
Pan indicated that AI data generation is advancing at a hundredfold speed, while NAND Flash manufacturers can only increase capacity by up to 50% through new facilities. He predicts that this shortage may not be fully resolved within the next decade. To cope with new GPU releases from NVIDIA and Apple products, the fourth quarter could see a situation where NAND Flash is unavailable even with sufficient funds. "I cannot find a reason for storage oversupply," he said.
In response to potential severe shortages in the second half of 2026 or even the fourth quarter, Phison Electronics has entered an emergency stockpiling phase. The company's NAND inventory value has exceeded NT$50 billion, and it has unprecedentedly initiated a fundraising plan totaling $1.18 billion (approximately NT$43 billion). These funds will be used to secure wafer and memory chip supplies in advance, preventing a scenario where products are unavailable regardless of price.
Market signals and institutional analysis corroborate this warning. NAND Flash prices have nearly doubled since January 2026, with some periods seeing single-day increases of 50%. Morgan Stanley estimates a potential 40% supply gap for mature process NAND in the second half of 2026, with annual price increases exceeding 200%. Goldman Sachs predicts a 4.2% NAND supply-demand imbalance in 2026, one of the largest shortages in industry history.
Facing an imminent supply crisis, Phison has undertaken historic financial measures. Reports indicate the company can only meet about 30% of customer demand, leaving a 70% gap. Pan revealed that a major PC manufacturer recently placed an emergency order for one million SSDs, and U.S. clients frequently request last-minute additions, forcing the company to mobilize all resources to barely keep up. He warned that waiting until peak demand hits would lead to an "unbuyable" market, prompting highly precise inventory planning focused on securing supplies for design-win projects.
To lock in supplies, Phison has structured a comprehensive fundraising strategy: up to $800 million (approximately NT$25.4 billion) in overseas unsecured convertible bonds (ECB), NT$6 billion in domestic unsecured convertible bonds, and NT$12 billion in syndicated bank loans, totaling over NT$43 billion. Pan admitted that sustained high NAND Flash prices have intensified financial pressure, leading to prepayment agreements with clients to share stocking burdens.
With NVIDIA's next-generation AI chip Rubin series set for release, Pan anticipates instant absorption of manufacturer capacity, making market imbalances the norm.
Recently, a Google paper on compressing KV Cache to one-eighth of its size sparked panic in the storage industry, raising concerns about reduced per-unit storage demand for AI servers. Pan offered a counterargument. He acknowledged that the technology compresses single-server memory and flash usage to one-eighth, lowering per-unit storage costs. However, this makes AI servers more affordable, enabling broader deployment. "Memory that once supported one server can now support eight," he said, explaining that these eight machines will generate data requiring external storage, ultimately increasing total demand.
He compared this logic to the automotive industry: when only Ferrari produced cars, few could afford them, and gasoline consumption was low. Once Toyota mass-produced affordable cars, gasoline shortages emerged. Similarly, cost-reducing innovations will accelerate AI adoption, boosting overall storage demand.
Shortage pressures are already emerging in consumer markets. Pan warned that mainstream laptops might revert to 256GB storage in the second half of the year, making consumer electronics the "biggest victims." However, he emphasized that total demand is not declining. For example, while consumers may delay SSD purchases due to triple-digit price increases, cloud service prices have risen fivefold, yet demand remains strong. "Total demand has not decreased; it has increased. Profitable enterprises continue buying, while consumers wait," he noted.
He predicted that once 256GB laptops hit the market, 20-30% of buyers will upgrade to 512GB via aftermarket services, revitalizing retail demand. "It's like gasoline prices doubling due to war—you still need to refuel to travel. It's a necessity," he added.
In the enterprise market, Phison's consumer business revenue has shrunk to 5-6%, with enterprise and industrial applications becoming the dominant segments amid severe shortages. Phison's 2025 revenue grew 23.3% year-over-year to NT$72.664 billion.
Pan concluded with a strategic insight: future competition will hinge not on token ownership but on storage capacity. "If you have sufficient storage space, you can achieve endless revenue," he said, comparing the current AI boom to the 2000 dot-com bubble, where internet startups collapsed, but internet usage exploded. Similarly, AI adoption will surge once costs decline. He noted that only the U.S. and mainland China currently possess cloud AI capabilities, but when AI applications mature, global storage demand will become structural, ending traditional industry cycles.
At a company event, Pan announced an additional month's bonus for employees with one year of service, totaling over NT$400 million. Summarizing the future, he stated: "Will AI happen? Yes. Does data need storage? Yes. Can storage ever be oversupplied? I see no scenario."
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