Memory chip stocks have taken a beating this week as market jitters over Chinese competition and potential oversupply take hold. In just five days, SK Hynix shares have nosedived 26%, Samsung has dropped 22%, and Micron has slid down 11%. The market's unease stems from ChangXin Memory Technologies (CXMT), China's top memory chipmaker, which announced plans to roll out a server memory product sporting new architecture. This move has stoked concerns that CXMT might snatch global market share from big players like Samsung, SK Hynix, and Micron, thanks to its higher storage density capabilities.
The skepticism among analysts about CXMT's ability to ramp up production of such advanced tech remains high, though. Ben Barringer, global head of technology research at Quilter Cheviot, pointed out the difficulties in achieving high yields with new architectural changes. Low yields could mean a lot of waste, he warned. Kevin Cassidy, a senior analyst at Rosenblatt Securities, also expressed doubts that CXMT's advancements will significantly shift the supply-demand balance in the memory market. He noted that the current developments are unlikely to flood the market with extra supply.
Further fueling market anxiety, a column in South Korea's Maeil Business Newspaper urged the government to brace for a possible cooling of the AI boom and to look for new growth engines. Predictions from Professor Hwang of Seoul National University and Ahn Ki-hyun, executive director of the Korea Semiconductor Industry Association, foresee a "flood of new supply" by 2029, potentially turning the memory market into a "red ocean." An oversupply of RAM in 2029 could squeeze memory stocks further, leading to lower prices and tighter profit margins. Yet, this long-term forecast has not gained wide support from other analysts.
Traditionally, consumer electronics companies have been the main buyers of memory chips, crucial for gadgets like smartphones and laptops. But the rise of AI has driven up demand for memory in data centers, pushing up prices and boosting stocks for Samsung, SK Hynix, and Micron. Investors, however, are now questioning whether the industry's classic boom-and-bust cycle is changing. Historically, memory prices soared when demand outpaced supply, only to tumble as production ramped up and the market became oversupplied. The ongoing expansion of manufacturing capacity by major memory makers, which takes three to five years to complete, suggests the shortage may not ease until 2028.
Counterpoint Research forecasts a 23% drop in DRAM prices in 2028 compared to 2027, though prices would still be up 230% compared to 2025. Jeongku Choi, a senior research analyst at Counterpoint Research, described the current memory market as entering a 'New Normal' era, where down cycles may not be as sharp as in the past. Choi explained that suppliers and buyers are entering into 3- to 5-year Long-Term Agreements (LTAs) with significant upfront payments and set price limits, ensuring consistency. Even if a downturn occurs, it is expected to be less severe than before.
