AI Server Demand Explodes, Memory Semiconductor Supply Shortage to Last at Least Until H2 2024

The explosive growth in demand for artificial intelligence servers is expected to cause memory semiconductor shortages to persist at least until the second half of next year. The resulting surge in memory prices is anticipated to put additional pressure on the profitability of the information technology industry, including smartphones and PCs.

Analyst Huang Mincheng from market research firm Counterpoint Research predicted during an online seminar, “It is unlikely that meaningful supply will appear before the second half of 2027,” and “New semiconductor factories need to start production around the end of next year to potentially resolve the supply shortage.” Currently, demand for memory semiconductors, especially server DRAM and high-bandwidth memory, is mainly driven by large cloud providers and GPU manufacturers like NVIDIA.

In the first quarter of this year, contract prices for memory semiconductors increased by 130% to 180% after the Lunar New Year, showing unprecedented soaring trends. Notably, sales of server DRAM and HBM now account for 60% of the entire market, with external factors like the Middle East conflict also contributing to demand growth. On the other hand, the sharp rise in memory prices is also putting pressure on IT manufacturers such as smartphone makers, with estimates that memory costs could rise to half of component costs, severely impacting the profitability of small and medium-sized enterprises.

Regarding supply, uncertainties remain high. Due to the limits of advanced process technology making productivity improvements difficult, ensuring new cleanrooms and equipment investments require approximately 150 trillion Korean won. Although Samsung Electronics and SK Hynix plan to invest between 80 trillion and 90 trillion Korean won in equipment, assessments suggest this still may not be enough to meet current demand.

In the long term, the catch-up efforts of Chinese memory companies could also become a significant factor. Over the next few years, ChangXin Memory Technologies is expected to expand its share in the DRAM market to double digits, while Yangtze Memory Technologies is increasing its influence in the NAND flash market. If the purchasing willingness of large-scale providers continues, supply shortages are likely to be difficult to resolve easily.