As demand for AI applications continues to be released, “advanced memory” construction is imperative, and memory chips may become a key investment target for the third phase of the National Big Fund.
The Zhitong Finance App learned that Huajin Securities released a research report saying that recently, the National Integrated Circuit Industry Investment Fund Phase III Co., Ltd. has been formally established, with a registered capital of 344 billion yuan. As demand for AI applications continues to be released, “advanced memory” construction is imperative, and memory chips may become a key investment target for the third phase of the National Big Fund. Currently, the domestic storage factory production expansion project is progressing in an orderly manner, and the operating rate is also steadily increasing. Under the accelerated catalytic acceleration of the National Big Fund Phase III policy, manufacturers of equipment, materials, etc. related to the storage industry chain have ushered in golden development opportunities. It is recommended to focus on targets related to the storage industry chain: Dongxin (688110.SH), Zhaoyi Innovation (603986.SH), Beijing Junzheng (300223.SZ), Jiang Bolong (301308.SZ), Demingli (001309.SZ), and Pran Co., Ltd. (688766.SH).
The main views of Huajin Securities are as follows:
Weak demand puts pressure on the short-term spot market, and the increase in AI phones/AIPC storage capacity drives storage demand
Specifically, look at this week's storage prices (as of 11:00 on May 28). According to CFM data, 1) FlashWafer: FlashWafer prices have remained unchanged this week. 2) DDR: DDR416gb3200/ETT and 8Gbett prices dropped slightly. 3) Channel market: The channel market is still in the inventory removal stage. Channel memory prices fell by 4% to 5% this week; channel SSD prices remained flat. 4) Industry market: There has been an increase in inquiries for small orders, but there are still few large orders. The market generally waits carefully, prepares goods and responds flexibly as needed. SSD prices in the industry remained unchanged this week, and industry memory declined slightly. 5) Embedded: The supply of scarce resources from the original factory continues to be tight, eMCP/LPDDR/UFS/uMCP prices remain unchanged, and only some eMMC prices have declined slightly.
CFM pointed out that although prices on the original factory resources and finished product side are still high, prices of consumer brands other than the original manufacturer have generally recovered. It is difficult for the traditional PC market to escape the plight of weak growth in the short term. Confidence in the storage spot market is insufficient due to weak demand, the pressure on the trade side to cash out is heavy, channel consumption of inventory is obvious, and the short-term storage spot market will continue to be under pressure. Huajin Securities anticipates that with the release of AI phones and AIPC, the storage capacity of 24H2 will increase significantly, which in turn will drive storage demand.
Driven by price increases combined with improvements in supply and demand, the original 24Q1 storage factory performed well
Benefiting from strong growth in AI demand, strong demand for server eSSD, DDR5 and HBM. Coupled with NAND process switching and DDR5 product iterations, the supply and demand for server memory chips is tight. At the same time, original manufacturers such as Samsung, SK Hynix, and Micron are actively converting or increasing production of high-profit HBM, continuing to squeeze out traditional memory chip production capacity and accelerate the return of supply and demand in the storage industry chain to balance. According to CFM data, the 24Q1 global storage market reached US$33.9 billion, up 86% year on year and 15% month on month. Driven by price increases combined with improvements in supply and demand, the storage revenue of the original 24Q1 storage factory rebounded month-on-month; on the profit side, after only SK Hynix's operating profit turned a profit in 23Q4 and the remaining four original factories (Samsung, Micron, Western Digital, and Kioxia) were all in a state of loss, the five major 24Q1 original factories all turned losses into profits.
In terms of NAND, CFM data shows that the global NAND market reached US$15.2 billion in 24Q1, up 74% year on year and 24% month on month. The average price of NAND rose sharply by 20% to 30% in 24Q1. Among them, the prices of Samsung, SK Hynix, and Micron all increased by about 30% month-on-month.
In terms of DRAM, CFM data shows that the global DRAM market reached 18.8 billion US dollars in 24Q1, up 97% year on year and 9% month on month. Benefiting from the overall recovery in DRAM prices and the increase in shipments of products such as HBM and DDR5, original DRAM revenue continued to grow; among them, SK Hynix and Samsung both increased by about 20% month-on-month, and Micron prices grew by more than 10% month-on-month.
With original production capacity shifting to high value-added products and demand recovery, the niche storage market is expected to pick up at an accelerated pace
Since 24Q2, some domestic Internet manufacturers have urgently ordered HBM and DDR5 products from the original factory. At the same time, since the HBM production line has switched to the HBM3/3E advanced process, in response to the customer's HBM2E express order demand, some original manufacturers can only urgently add production lines and switch some DDR4 production lines to HBM2E; it is expected that by the end of 2024, about 80% of the original factory's DDR5 production capacity will switch to DDR5. DDR4 supply may be in short supply.
According to iHome, Samsung and SK Hynix are expected to retire their DDR3 production line at 24H2. Considering that Micron and South Asia currently have limited DDR3 production, the withdrawal of the two major original manufacturers may push up DDR3 prices. GigaYi Innovation indicated that demand for SLCNAND is picking up and prices are about a quarter behind DRAM, while NOR supply and demand have returned to balance. Huajin Securities believes that with the popularity and application of end-side AI such as AI mobile phones, and emerging technologies such as AR/VR to stimulate demand for wearable products, NorFlash is expected to enter an upward cycle.
Risk warning: The recovery in downstream demand fell short of expectations, the terminal inventory removal effect was lower than expected, the R&D process of relevant manufacturers fell short of expectations, the actual payment of funds contributed by fund investors fell short of expectations, systemic risks, etc.