Dell's Vice Chairman and Chief Operating Officer, Jeff Clarke, recently stated that costs are expected to rise in the second quarter, including all forms of costs, freight, and component costs. He expects that DRAM and solid-state drive prices will rise 15% to 20% in the second half of 2024, "We will study the cost structure of SSD and DRAM in our entire product portfolio and make adjustments accordingly."

As global memory chip continues to recover, major storage chip manufacturers have already started to raise prices. Some insiders say that from the end of 2023, the global semiconductor storage industry will gradually enter an upward cycle. This year, they have received several notices from upstream storage chip makers to increase contract prices.

According to the latest estimation from TrendForce, the contract price increase for DRAM in the second quarter will be raised to 13%-18%; the contract price increase for NAND Flash will also be raised to about 15%-20%.

Shanxi Securities said that the price increase trend is clear, and storage has entered a new upward cycle. Seizing the industry's cyclical reversal opportunity. With the improvement of operating profit margin brought about by continuous storage price increases in the future, leading storage manufacturers are expected to welcome the Davis double-click of performance and valuation, and there is significant rebound space in the industry.

Chip sector-related companies:

Shanghai Fudan (01385): As a domestic chip design enterprise with a relatively wide product line, the company's business covers four major product lines of security and identification chips, non-volatile memory, smart meter chips, and field-programmable gate arrays (FPGA). The company provides chip testing services to customers through its holding subsidiary, Hualing Corporation. The company has four different series of dozens of products with millions of door-level FPGA, billions of door-level FPGA, tens of billions of door-level and PSoC, with the full-process independent intellectual property rights FPGA supporting EDA tool ProciseTM, is the leading domestic programmable device chip supplier.

Semiconductor Manufacturing International Corporation (00981): In the February performance conference, SMIC said that under the condition of no major changes in the external environment, the guidance given for 2024 is: sales revenue growth rate is not lower than the industry average, year-on-year single-digit growth. The company plans to continue to promote the 12-inch factory and capacity construction plans announced in recent years in 2024, and is expected to have a capital expenditure roughly similar to the previous year. The outlook for 24Q2 is optimistic, with expectations that the international consumer market will recover, low-power BlueTooth, MCU began to add single; Olympic-related set-top boxes and televisions started to be sold in volume; smartphone manufacturers this year have a relatively strong initiative, especially domestic mobile phone manufacturers are actively stocking up for market share and supply exceeds demand.

Hua Hong Semiconductor (01347): In the survey, Hua Hong Semiconductor believes that the basic lowest foundry price has been reached in Q4 of 2023, and the foundry price has stabilized at present. Looking forward to the whole year, Q1 of 2024 is the low point of performance, and Q2 will continue to improve, and the second half of the year is expected to fully recover. The new plant in Wuxi is expected to start production at the end of 2024, and the company will enter the period of high capital expenditure investment. The capital expenditure of Q1 2024 is 303 million US dollars, including Hua Hong 8-inch 32 million US dollars, Hua Hong Wuxi 71 million US dollars, and Hua Hong Manufacturing 200 million US dollars. According to Shanghai Construction Group, the Wuxi Manufacturing Project of Hua Hong has achieved full roof sealing on April 20th, and it is expected to be completed and put into production at the end of 2024, forming a monthly production capacity of 15,000-20,000 12-inch wafers. It will complete the construction of the first phase of 40,000 12-inch wafer monthly capacity in 3Q25, and gradually form a monthly production capacity of 83,000 12-inch wafers within three years. Therefore, we expect that the company's capital expenditure from 2024 to 2026 will increase significantly, and the two new wafer production lines will bring significant depreciation improvement.