Silicon Motion CEO Wallace Kou Analyzes Global Memory Market Shifts Toward AI Inference Leading To NAND Flash Shortages and Higher Prices Until 2028
Wallace Kou, the General Manager of Silicon Motion SIMO, has made a critical analysis of the global memory market by highlighting the shift in AI investment from model training to inference. According to UDN report, this evolution has led to simultaneous spikes in DRAM and NAND Flash demand. Kou also predicted a permanence in the supply side limitations, with the NAND Flash shortage likely to continue until 2028, and expected to boost memory prices in the second half of the year.
The current market trends were strongly impacted by the rapid expansion of North American cloud service providers on AI hardware, and their aggressive purchases of memories, especially in long term contracts with advance payments to ensure a continuous supply in the midst of impending hardware shortages. While these large purchases would be unsustainable, it is predicted that memories would never go back to historical cyclical pricing, with large manufacturers focusing on product value upgrade and margin enhancement by technical innovation.
The gap will continue to widen due to a number of long lead time structural barriers limiting capacity expansion, especially the fact that output would not be visible in the market after a capacity expansion is even implemented starting today. Kou says, for the construction of a fab, including the purchase of the site, building of the cleanroom, and equipment delivery, a 2-3 year time gap will always persist, which is compounded by the 1-1.5 year delivery time of advanced lithography equipment and ensure no quick fix for the gap in supply and demand for memories.
Rising costs also lead to a division among brands of hardware; the increase in prices will not be as steep compared to 1H22, however high cost of components already eats up margins for smart phones and personal computers manufacturers, thus favor the largest brand with stronger purchasing power, for instance Apple, whose market share is expected to expand drastically, as it would possess the capability and bargaining power to absorb the premium of mobile DRAM and high density storage compared to their smaller rivals.
The report also discussed the status of the memory market in China and the progress in Yangtze Memory Technologies (YMTC), who managed to make certain achievements by integrating its domestic tool with its existing ones despite limitations to procure high stack production equipment. Kou suggested that YMTC will be a benchmark to look forward to if they will become a formidable competitor with other leaders in the NAND Flash market by 2030.
For hardware makers, both investors and enthusiasts will see the change; low price and ample supply era is over, and the market has now entered a new age of high value, tight supply, and organizations need to improve hardware scale and efficiency to adapt. The focus for next 2 years will solely revolve around the issue of yield management and equipment procurements as it pertains to the upcoming deficit in 2028.
