South Korea KOSPI index displayed on a smartphone displaying the SK Hynix and Samsung logos.
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Memory chip stocks have been hit particularly hard this week amid widespread turmoil in the stock market.
Two concerns are adding to the pressure: debate over whether Chinese competition threatens memory incumbents and speculation about when the market will become oversupplied.
In these 5 days, SK Hynix plunged 26%, Samsung plunged 22%, micron It fell about 11%.
China is concerned
The first disruption occurred earlier in the week after ChangXin Memory Technologies (CXMT), a leading Chinese memory chip manufacturer, announced plans to roll out server memory products based on a new architecture.
CXMT’s design allows for higher storage densities, raising concerns that the breakthrough could allow Chinese companies to steal global market share from rivals Samsung, SK Hynix and Micron.
However, many analysts doubted whether CXMT would be able to scale up production of such advanced technology.
“The problem, of course, was in changing the architecture… You can make a chip, but at what yield? If you can only get a 50% yield, you’re literally throwing half a chip in the trash because it’s not going to work very well,” Ben Barringer, global head of technology research at Quilter Cheviot, told CNBC’s “Squawk Box Europe” on Wednesday.
Kevin Cassidy, senior research analyst at Rosenblatt Securities, also said that the development of CXMT is unlikely to add more memory to the market.
“I don’t think this will change the supply-demand relationship in any significant way,” Cassidy told CNBC.
Oversupply by 2029?
Traders are also discussing comments in an opinion column in the Mainichi Keizai Shimbun, a prominent South Korean publication. In it, the reporter urged the country’s government to prepare for a slowdown in the AI boom and identify and develop the next big growth engine.
According to a translation by CNBC, the author, Professor Hwang of Seoul National University and Ahn Ki-hyun, executive director of the Korea Semiconductor Industry Association, said they expect a “flood of new supply” to occur in 2029, turning the memory market into a “red ocean.” By 2030, the author said, “the supercycle could be over and the industry could enter a downturn.”
space x and tesla CEO Elon Musk responded to the article in a post on X, saying that China “will be producing tons of RAM in 2028.”
Random access memory (RAM) is manufactured by companies such as SK Hynix, Samsung, and Micron, as well as by China’s CXMT.
If RAM becomes oversupplied in 2029, falling prices and narrowing margins will create further headwinds for memory stocks. However, other analysts disagree with such a wildly off forecast.
Consumer electronics companies are typically the biggest customers for memory chips, as memory is a critical component of devices such as smartphones and laptops.
But as the AI boom accelerates, memory has also become a key component of Nvidia chips and other parts of the data center supply chain. As demand increases, supply becomes tighter, causing unprecedented price increases.
As a result, the stock prices of the three major memory manufacturers, Samsung, SK Hynix, and Micron, rose significantly. But a key question for investors is whether the industry’s typical boom-and-bust cycle is finally changing.
Memory prices traditionally rise when demand exceeds supply, but fall when manufacturers ramp up production and the market becomes oversupplied. Investors are trying to determine whether the cycle no longer exists or whether there has been a fundamental change.
All major memory manufacturers are currently expanding production capacity, but it will take about three to five years for factories to be built and operational.
For this reason, many analysts predict that the shortage will not ease until 2028, but that will not necessarily lead to significant price declines.
Counterpoint Research expects the price of DRAM, another major type of memory, to fall by about 23% in 2028 compared to 2027. However, DRAM prices are expected to increase by approximately 230% compared to 2025.
Jeongku Choi, senior research analyst at Counterpoint Research, told CNBC: “The current memory market is considered to be in a ‘new normal’ era, and the downcycle will be different than in the past.”
“Suppliers and buyers enter into long-term agreements (LTAs) of three to five years, with large upfront payments and set price caps and floors to ensure consistency. As a result, even if a downcycle occurs, we don’t expect it to show the sharp decline seen in the past.”
—CNBC’s Lisa Kim contributed to this report.
