The AI server boom is accelerating the memory industry into a rebound
Last year, the memory industry experienced a downturn due to various factors, such as changes in the global economy and sluggish demand for consumer electronics terminals. The semiconductor memory market stayed sluggish in the first quarter of this year, with the top storage chip manufacturers, including Samsung, SK Hynix, and Micron, witnessing a decline in quarterly revenue and an expansion of profit losses.
In the second quarter, the memory industry is showing slight signs of a turnaround, with urgent orders emerging in certain demand areas. One DRAM manufacturer stated in May that the second quarter DRAM market is expected to hit bottom, with urgent orders appearing in certain sectors such as TV. Another memory manufacturer said they has recently saw a rebound in customer demand for the three major applications: consumer electronics, television, and the Internet of Things. Additionally, there has been continued high demand for orders related to industrial control.
Currently, the memory market appears to have shown some signs of recovery, but industry insiders believe that the memory industry is still in a bottoming-out phase in the second quarter.
According to TrendForce’s latest research, as production cuts to DRAM and NAND Flash have not kept pace with weakening demand, the ASP of some products is expected to decline further in 2Q23. DRAM prices are projected to fall 13~18%; NAND Flash is expected to fall between 8~13%.
One China memory manufacturer said，the current downturn in the memory market is primarily influenced by insufficient momentum in terminal demand. The revival of the memory market largely hinges on the recovery of the macro economy and the rebound of the terminal consumer market.
Industry insiders believe that the restoration of consumer purchasing power in the terminal consumer market can be largely reflected in the market conditions of the consumer electronics sector, with a particular focus on the smartphone market, which has a significant consumer share. One agency recently suggested that the recovery of smartphones may not be as good as expected. According to TechInsights, the forecast report shows that global smartphone shipments will continue to shrink in 2023. Compared with the version released in March 2023, TechInsights will Annual smartphone shipments are revised down from 1.1881 billion to 1.16 billion units (Note: Data decreased by 23.3 million units), a year-on-year decrease of 2.8% from 1.2 billion units in 2022.
Given the forecast, smartphone makers remain cautious about memory inventories until demand normalizes and visibility improves, resulting in high inventory pressure for supplier and limited improvement in the memory oversupply market conditions.
Therefore，the revival of the memory industry in the short term will be predominantly driven by non-smartphone markets, given the continued sluggishness of the smartphone market.
In the non-smartphone market, we observe that in 2023, AI applications represented by ChatGPT are driving a surge in AI server growth.
Major cloud providers such as Microsoft, Google, Amazon, Baidu, and ByteDance are actively building AI servers, which has led to a significant surge in memory demand. This development may accelerate the memory industry's early entry into the rebound phase.
Trendforce predicts a dramatic surge in AI server shipments for 2023, with an estimated 1.2 million units—outfitted with GPUs, FPGAs, and ASICs—destined for markets around the world, marking a robust YoY growth of 38.4%. This increase resonates with the mounting demand for AI servers and chips, resulting in AI servers poised to constitute nearly 9% of the total server shipments, a figure projected to increase to 15% by 2026.
With the rapid growth in AI server usage, it is expected to drive a substantial demand for memory.
According to Micron's estimation, the DRAM capacity of an AI server is about 8 times that of an ordinary server and 3 times that of NAND. The memory capacity of Nvidia's most powerful new AI supercomputer DGX GH200 AI is about 500 times larger than that of the previous generation computer DGX A100.
Recently, Korean media reported that, both Samsung and SK Hynix, two major players in the memory industry, have seen a sharp increase in orders for High-Bandwidth Memory (HBM), leading to a significant price hike.The industry believes that as AI models become increasingly complex in the future, it will also drive a simultaneous surge in the usage of more storage products.
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