In the traditional electronic component cycle, price fluctuations are often driven by inventory changes. However, the current memory market is undergoing a complete logical reshaping. Based on a comprehensive analysis of original factory capacity allocation, global AI capital expenditure, and wafer manufacturing capacity constraints, SMCC believes that this round of DDR5 price increases is not a short-term inventory cycle rebound, but a structural and long-term supply-demand mismatch triggered by the explosion of AI computing power. Prices will not decline rapidly in the short term, and shortages will persist throughout 2026–2027.

01 Capacity Siphon

HBM Occupies Advanced Processes, Continuously Squeezing DDR5 Supply

The global DRAM market is highly concentrated, with the top three manufacturers—Samsung, SK Hynix, and Micron—accounting for over 90% of capacity. Driven by high profit margins, leading vendors have continuously shifted advanced 1a/1b/1c process capacity toward high-margin HBM (High Bandwidth Memory) over the past two years, creating a significant "capacity siphon" effect.

Key industry data shows that producing one HBM stack wafer consumes the equivalent wafer area of three DDR5 chips. HBM gross margins once reached four times that of DDR5, so manufacturers naturally prioritize AI server HBM orders. All HBM capacity for 2026 has been sold out in advance, continuously squeezing general DDR5 output. DDR5 for PCs, consumer electronics, and industrial applications has become a lower priority in capacity allocation.

A critical inflection point occurred in Q1 2026: server DDR5 profit margins surpassed HBM3e for the first time, prompting manufacturers to reallocate some capacity to the server sector. However, consumer-grade DDR5 supply remained constrained, and spot shortages persisted.

02 Surge in AI Demand

Tenfold Growth in DDR5 Demand Widens Supply-Demand Gap

AI infrastructure investment has become the core driver of memory demand, fully offsetting weakening demand from mobile and PC terminals:

• Global AI server shipments surged 180% year-on-year in 2026, with each AI server using 8–10 times more DDR5 than traditional servers;

• Annual capital expenditure by the world’s top five cloud service providers reached $755 billion, with memory procurement rising from 8% in 2024 to 30%;

• AI PC adoption drives 16GB minimum and 32GB standard configurations, while LPDDR5X BOM costs in flagship phones jump from 10–15% to 30–40%.

Overall DRAM demand grows 30–50% annually, while global memory wafer capacity expands only 10–15% per year. Demand growth far outpaces capacity expansion, continuously widening the supply shortage.

03 Capacity Expansion

Three Hard Constraints Limit New Supply Growth

Even as major memory manufacturers increase capital spending and plan new fabs, multiple barriers prevent rapid effective supply growth:

• Long construction cycles: Advanced DRAM clean fabs take more than three years from groundbreaking to stable mass production;

• High capital thresholds: A single advanced memory fab requires $15–25 billion in investment;

• Equipment constraints: ASML EUV lithography machines have an annual output of only 50–60 units, leading to fierce competition among chipmakers worldwide.

According to TrendForce, Goldman Sachs, Morgan Stanley, and other global authorities, large-scale new memory chip capacity will not be fully released until late 2027 to 2028. This means tight supply will be the norm in 2026–2027.

04 SMCC Insight

Upcycle Far From Over, Structural Shortages to Persist

Based on OEM production schedules, global spot channel inventories, and customer order trends, SMCC outlines four key market trends to support precise procurement and stocking strategies:

1. Contract prices continue rising, spot market volatility intensifies

DDR5 contract prices will keep rising in the second half of 2026. Although Q3–Q4 sequential growth moderates to 30–50%, the price center continues shifting upward. Spot markets fluctuate frequently due to hoarding, panic buying, and scarce core inventory. No stable low-price window is expected throughout the year. Waiting for lower prices will only increase procurement costs.

2. Structural divergence, premium for specific models

Shortages are highly structural: high-density 128GB+ server DDR5 modules, high-speed DDR5-6400, industrial wide-temperature DDR5, and automotive-grade LPDDR5X will face prolonged shortages. Some consumer-grade models remain available but with longer lead times and consistent premiums. No broad market easing is in sight.

3. DDR4/DDR5 price inversion becomes normal

Under OEM strategic adjustments, mature capacity will not return to DDR4 production, reducing output of older generations. As DDR5 inventories deplete, supply gaps will widen further, making price inversion between older and newer memory standard. This will continue until DDR4 phases out of mainstream applications.

4. Traditional cycle logic invalidated, AI reshapes memory industry

The historical three-year boom-bust memory cycle has been rewritten by AI. DDR5 is no longer a standard commodity but a strategic resource for AI computing infrastructure.

Purchasing models are shifting accordingly, with 3–5 year long-term supply agreements replacing short-term quarterly orders. High price levels will last at least until late 2027. The CEO of SK Hynix has publicly predicted that the global memory supply gap could extend to 2030.

Amid AI-driven structural changes, passive waiting exposes businesses to higher supply chain costs. Leveraging long-standing semiconductor industry expertise and market insights, SMCC provides accurate analysis, reliable spot supply, and flexible stocking solutions to help clients capitalize on cycle opportunities, mitigate price risks, and ensure stable supply chains.