CMSC has released a research report stating that the memory industry has entered an AI-driven structural supercycle. Global memory companies achieved record-high performance in Q1 2026, with supply-demand tightness expected to persist through 2027 or even longer. Regarding pricing, recent short-term fluctuations in spot prices do not alter the upward trend in contract prices and do not signal a reversal in memory pricing trends. As memory manufacturers increasingly sign multi-year strategic agreements, their earnings visibility will improve significantly. Concurrently, the acceleration from standardized to customized memory products is expected to further reduce the industry's commoditized nature and cyclical volatility. The report recommends focusing on companies across the industrial chain, including overseas memory manufacturers, domestic module makers, niche memory players, and upstream equipment/material suppliers. CMSC's key views are as follows:
On the demand side, AI inference is driving a structural surge in full-stack memory demand, and the trend toward customization may weaken the industry's cyclical attributes. AI is evolving through three stages: "inference → Agentic AI → Physical AI." Coupled with the projected total capital expenditure of the world's nine major CSPs reaching approximately $830 billion in 2026 (a year-on-year increase of 79%), this is jointly driving growth in full-stack demand for HBM, Server DRAM, eSSD, and HDD. AI inference has become the core driver, with data center AI inference NAND bit demand projected to grow at a CAGR of 56% from 2025 to 2031. Simultaneously, new architectures such as HBM4's shift to logic processes for base dies, and the emergence of CXL, SOCAMM, 3DDRAM, and HBF, are accelerating the transition from standardized to customized memory products. This raises industry barriers and is expected to mitigate the commoditized nature and cyclical volatility of the memory sector.
On the supply side, while capital expenditure by original manufacturers increased substantially in 2026, the actual net new effective supply of DRAM and NAND remains very limited due to HBM capacity allocation. According to SemiAnalysis, DRAM supply in 2026 is expected to fall short of demand by about 7%, with an HBM shortfall of 6% widening to 9% in 2027. Apacer forecasts a DRAM shortfall of 8% and a NAND shortfall of about 5% in 2026. Although capital expenditure by the three major original manufacturers increased significantly year-on-year in 2026, new wafer capacity is highly concentrated and primarily allocated to HBM, almost entirely at Samsung's P4, SK Hynix's M15X, and Micron's A3 facilities, with M15X and A3 mainly dedicated to HBM production. There is virtually no net increase in NAND wafer capacity, with bit growth relying mainly on technological upgrades. Additionally, Kioxia's announcement to discontinue 2D NAND production by 2028 further tightens supply. Other expansion projects (SK Hynix's Yongin, Micron's Taoyuan/Idaho) will not contribute substantially to output until after the second half of 2027, resulting in very limited overall net new effective supply.
Regarding inventory, original manufacturers and niche players continue to reduce inventory, with days of inventory (DOI) declining. Module manufacturers are proactively increasing stockpiles to secure supply capacity. Original manufacturers Samsung, SK Hynix, Micron, and Nanya Technology maintained low inventory levels in Q1 2026. Micron's DRAM inventory turnover days have dropped to a tight level below 120 days. SanDisk actively built inventory to support newly signed NBM agreements, with inventory increasing 14% quarter-on-quarter, while Western Digital's DOI decreased significantly quarter-on-quarter. Taiwanese module manufacturers (Phison, ADATA, Team Group, etc.) accelerated stockpiling and signed long-term agreements (LTAs) to lock in supply. Niche manufacturers (Winbond, Macronix, ESMT) saw their DOI decline quarter-on-quarter. On the mainland, the combined inventory of the three module manufacturers—Longsys, DMEGC, and BIWIN—reached a new high of 42.22 billion yuan in Q1 2026, marking five consecutive quarters of quarter-on-quarter growth. The inventory growth rate of mainland niche manufacturers was significantly lower than that of module makers, with DOI continuing to improve.
On the pricing front, short-term spot market fluctuations do not change the upward trend in contract prices. In the second quarter, NAND contract price increases are leading those of DRAM. At the index level, the DXI, DRAM, and NAND price indices all reached阶段性 highs around April before slightly retreating, declining by 0.4%, 2.7%, and 5.3% from their peaks, respectively. In the spot market, DDR4 16Gb experienced a significant month-on-month correction, and NAND spot prices have cumulatively fallen 30-40% over the past month. This is primarily due to weak buyer acceptance following previous excessive price increases, coupled with some traders facing liquidity pressure and selling at lower prices. However, the upward trend in contract prices remains unchanged. According to TrendForce, traditional DRAM contract prices in Q2 2026 are expected to increase 58-63% quarter-on-quarter, while NAND contract prices are projected to rise 70-75% quarter-on-quarter. The leading increase in NAND is driven by sustained strong demand from AI/data centers, original manufacturers prioritizing supply for high-value categories, and CSPs actively signing LTAs to lock in volumes. The short-term adjustment in spot prices is a阶段性 disturbance and does not represent a reversal in the memory price trend.
Regarding sales, multi-year agreements continue to reinforce earnings visibility, with supply-demand tightness expected to last through 2027 or even longer. For original manufacturers, Samsung, SK Hynix, Micron, and Nanya Technology all achieved record revenue and gross margins in Q1 2026. DRAM ASP increased by mid-60% quarter-on-quarter, and NAND ASP increased by mid-70% quarter-on-quarter. Original manufacturers are actively pursuing multi-year strategic agreements (SAC/NBM/LTA) with customers. Micron successfully signed its first five-year SCA agreement. SanDisk signed five NBMs covering over one-third of its bit production for the 2027 fiscal year, involving more than $11 billion in financial guarantees. Some LTAs for Western Digital and Seagate already extend to 2028-2029, significantly enhancing earnings visibility and stability. Companies across the supply chain in Taiwan and mainland China are also benefiting comprehensively, with March/April monthly revenues普遍 reaching record highs. Taiwanese niche manufacturers are operating at full capacity, with contract price increases in multiples, and shortages are particularly acute in细分 categories like eMMC. Module manufacturers, driven by AI-fueled demand for high capacity, achieved record quarterly revenues in Q1 2026 and普遍判断 the shortage will persist through 2027. On the mainland, niche manufacturers such as GigaDevice, Puya Semiconductor, Dosilicon, and Ingenic Semiconductor reported substantial year-on-year and quarter-on-quarter growth in revenue and profit for Q1 2026. The three module manufacturers—Longsys, DMEGC, and BIWIN Storage—all saw high growth in revenue and profit, reaching new highs in Q1 2026, with average monthly profit around 1 billion yuan, indicating a significant leap in profitability. As overseas majors gradually exit the 2D NAND and niche DRAM markets, mainland manufacturers are expected to continue expanding their market share.
Investment Recommendation: Performance across the memory industry chain was impressive in Q1 2026. The implementation of binding long-term agreements provides significant assurance for memory companies' earnings visibility and growth. The current memory shortage continues to intensify, and supply is unlikely to increase substantially in the short term. The supply-demand gap is预计 to persist through 2027, and the upward trend in memory contract prices is also expected to continue. The future market price trend and the sustainability of performance growth for companies across the chain are key focus areas. The report recommends关注 companies in three core segments: memory, equipment, and the industrial chain: 1) Overseas Memory: SanDisk, Micron, SK Hynix, Samsung, Western Digital, Seagate, Kioxia, etc. 2) Domestic Original Manufacturers: ChangXin Memory Technologies (IPO in progress), Yangtze Memory Technologies. 3) Module: Longsys, BIWIN Storage, DMEGC, Dapu Micro, Netac Technology, etc. 4) Niche Memory: GigaDevice, Puya Semiconductor, Ingenic Semiconductor, Dosilicon, Hensergy, Giantec Semiconductor, etc. 5) Foundry and Packaging/Testing: SMIC, Hua Hong Semiconductor, JCET, Tongfu Microelectronics, Huatian Technology, Hefei Chipmore Technology, Shenzhen Kaifa Technology, etc. 6) Memory Equipment: NAURA, AMEC, Piotech, Hwatsing Technology, Leadmicro, Kingsemi, Jingce Electronic, Skyverse Technology, Grandit, Jinhongtong, Jingzhida, Qiangyi, ASMPT, etc. 7) Memory Materials: JFM, Silicong, Dinglong, Xingfu, Shanghai Sinyang, Anji, Essence, etc.
Risk Warnings: AI computing power capital expenditure falling short of expectations, inventory impairment risks, international trade friction and supply chain fluctuations, intensifying industry competition, exchange rate volatility risks, risks of price declines.
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