The Zhitong Finance App learned that Shanxi Securities released a research report stating that considering that the operating profit margins of the three major storage manufacturers still have a lot of room to rise from historical highs, and that storage prices continue to rise for at least 6-8 quarters in each upward cycle, storage prices have only risen for 2 quarters in this upward cycle, so the storage price increase trend may continue for longer. In the future, as operating profit margins improve due to continued increases in storage prices, storage vendors are expected to face a double hit in performance and valuation, and there is plenty of room for a rebound in the industry.
The main views of Shanxi Securities are as follows:
According to Shanxi Securities, the price of upstream storage wafers has bottomed out since 2023Q3, and the average spot price has risen 30% from a low in September 2023 to March 2024. The upward trend is obvious. After the price of upstream wafers was raised, due to downstream module manufacturers falling below normal seasonal levels, leading to a rush of goods at terminals, storage module prices also rose, and storage entered a new upward cycle.
Supply side: Inventories tend to be normalized. The capital expenditure of the three major storage manufacturers is focused on high-end storage such as HBM and DDR5, and the overall output growth of the industry is limited.
Shanxi Securities believes that as the three major original storage manufacturers continue to reduce capital expenses, cut production and adjust inventory to control the total excess supply in the market, the level of overseas memory chip inventory is normalizing. According to public statistics, Hynix inventory has declined somewhat from the previous high level. Samsung and Micron inventory growth has slowed. Micron also revealed in the previous FY24Q1 financial report that storage inventories in PC, mobile phones, automobiles, industrial and other terminal markets are already at or close to normal levels, and data center storage inventory performance is improving, and is expected to approach normal levels by the first half of 2024. In 2024, the three major storage manufacturers are clearly expanding production of high-end storage products such as HBM and DDR5, and compared with existing DDR products, HBM is larger and requires a bottom buffer chip, further limiting the production of non-HBM storage products.
Demand side: Downstream market recovery is compounded by the AI wave, boosting storage demand, increasing the carrying capacity of stand-alone machines or becoming the main driving force for demand growth.
The main downstream application markets for storage are smartphones, PCs, and servers. New product releases combined with the new AI ecosystem drive smartphones to usher in a wave of switching. Canalys expects global smartphone shipments to increase 4% year on year in 2024; PC inventory removal will be effective, and the PC market will gradually recover. Canalys expects global PC shipments to increase 8% year on year in 2024; rapid growth in AI server shipments is offsetting the delay in general-purpose server iteration. According to TrendForce data, global server shipments in 2024 Volume is expected to increase 2.05% year over year.
However, the increase in DRAM and NAND stand-alone capacity may be the main driving force for the increase in demand in the storage market. According to Micron estimates, the DRAM usage of an AI server is 8 times that of an ordinary server, and the usage of NAND is 3 times that of an ordinary server. With the increase in smartphone penetration and the implementation of AI end-side applications, DRAM and NAND stand-alone capacity is expected to increase by more than double digits in 2024.
The upward trend in prices is clear, and storage has entered a new upward cycle to seize the opportunity of a reversal of the industry cycle.
Demand for HBM and DDR5 high-end storage is increasing, and we are optimistic about the localization of the storage industry chain in the long term. Processor upgrades are driving the DDR5 penetration rate to increase rapidly. The DDR5 penetration rate is expected to reach 25%-30% in 2023, and the penetration rate may exceed 50% by mid-2024. Benefiting from the explosion in demand for artificial intelligence, HBM's global market size is expected to reach US$16.9 billion in 2024, according to Trend Force data.
From a process perspective, mainstream manufacturers have entered the beta process corresponding to the 10nm/12nm process node. Changxin has begun mass production of 18.5nm DRAM chips, with a monthly output of up to 100,000 wafers. At the same time, it is expected that there will be more HBM and DDR5 related plans. Changzun will take the lead in mass production of 232 layer 3D NAND in early 2022, leading overseas manufacturers for the first time. Localization of memory chips and modules is the key, and the rapid development of Changxin and Changcun will surely accelerate the localization of the storage industry chain.
Key companies are concerned that storage still has good growth potential, and they are optimistic about opportunities to determine the reversal of the industry cycle and investment opportunities under the trend of industrial chain localization. Recommended attention:
1) Storage module: Baiwei storage (688525.SH), Demingli (001309.SZ), Jiang Bolong (301308.SZ).
2) Memory chip design: Zhaoyi Innovation (603986.SH), Beijing Junzheng (300223.SZ), Dongxin (688110.SH), Pran (688766.SH).
3) Supporting chips on the module side: Lanqi Technology (688008.SH), Juchen Co., Ltd. (688123.SH).
4) HBM industry chain: Changdian Technology (600584.SH), Tongfu Microelectronics (002156.SZ), Yongsi Electronics (688362.SH); Saiten (603283.SH), Jingzhida (); Huahai Chengke (Dubai), Lianrui New Materials (Sichuan); Shannon Xinchuang (300475.SZ). 688627.SH 688535.SH 688300.SH
Risk warning: Downstream demand recovery falls short of expectations, risk of technology research and development process falling short of expectations, risk of domestic substitution falling short of expectations, geopolitical risk.