Open Source Securities: DDR3 in short supply, price hike trend spreading to niche storage market.

Zhitong App learned that Open Source Securities has released a research report. On the supply side, according to Shunde Information, Samsung, SK Hynix, and Micron Technology are vigorously seizing the emerging markets of HBM and DDR5. New production capacity is being invested in related new products, gradually phasing out the DDR3 market, and reducing the supply of niche DRAM capacity. On the demand side, with the increasing demand for AI and networking, terminal products incorporating AI technology have a need for capacity upgrades from DDR3. Since 2023H2, mainstream storage product prices have shown a clear rebound. With the improvement of the supply-demand structure in niche markets, niche storage products such as DDR3 are expected to follow suit and rise, achieving a full recovery of storage chips across all categories, and the sector's prosperity continues to improve.

Open Source Securities' viewpoint is as follows:

Review of last week: Slow movement in the spot market, intense competition between supply and demand

Regarding the index: According to flash market data, the storage market in Week 11 of 2024 showed some differentiation, with the NAND index increasing by 0.63% and the DRAM index decreasing by 0.02%, basically remaining stable. In terms of prices: NANDFlash wafer prices remained unchanged, while DDR4 eTT resources followed a slight increase in actual transaction prices; in the channel market, the first quarter saw flat channel demand, with a small amount of dumping in the channels, but costs did not decrease. Therefore, the overall market situation remained relatively stable, with prices unchanged; in the industry market, recent industry demand mainly focused on small stockpiling, overall demand was weak, and there were signs of delayed deliveries. This week, industry prices remained unchanged; in terms of embedded flash, due to limited embedded resources supply, along with stable demand for embedded products in the spot market, some embedded prices increased: eMCP and uMCP prices rose across the board (MoM +2.8%/+5.5%), while some eMMC and UFS prices increased (MoM +1.5%/+1.4%), and embedded LPDDR prices remained unchanged.

Niche market: DDR3 in short supply, prices expected to rise by 20% in Q2

On the supply side, according to Shunde Information, Samsung, SK Hynix, and Micron Technology are vigorously seizing the emerging markets of HBM and DDR5. New production capacity is being invested in related new products, gradually phasing out the DDR3 market, and reducing the supply of niche DRAM capacity. On the demand side, with the increasing demand for AI and networking, terminal products incorporating AI technology have a need for capacity upgrades from DDR3. In terms of prices, the three major manufacturers have successively raised DDR3 prices since 2023Q4. With the market facing a shortage of supply, Nanya also plans to follow suit and raise prices in 2024Q2, increasing DDR3 prices by 20%, a significant increase. Since 2023H2, mainstream storage product prices have shown a clear rebound. With the improvement of the supply-demand structure in niche markets, niche storage products such as DDR3 are expected to follow suit and rise, achieving a full recovery of storage chips across all categories, and the sector's prosperity continues to improve. Recent Developments in Major Manufacturers: Capacity Utilization Gradually Increasing, Chinese Memory Manufacturers Seeing Year-on-Year Revenue Growth for Several Consecutive Months

According to Shande Information, as inventory adjustments and the improvement in demand in the smartphone market, the capacity utilization rate of Samsung's Xi'an factory is steadily increasing, currently reaching 70%. At the same time, Kioxia plans to increase the NAND capacity utilization rate to 90% within March. Major manufacturers have been frequently adjusting their capacity utilization rates recently, reflecting a gradual improvement in demand. In terms of performance, with prices gradually rebounding, South Korea's storage chip exports in February saw a significant double-digit increase month-on-month (+108% year-on-year/+14% month-on-month), and the revenues of many Chinese memory manufacturers have been increasing year-on-year for several consecutive months. Enterprises like YMTC and Tsinghua Unigroup have seen year-on-year growth of over 30% for three consecutive months, showing positive momentum.

As the sector continues to recover and demand grows for products like HBM and DDR5, related companies are expected to benefit significantly. Potential beneficiaries include:

(1) Memory Chips: GigaDevice (603986.SH), Purui Shares (688766.SH), Dongxin Shares (688110.SH), etc.; (2) Memory Modules: Jiangbolong (301308.SZ), Demingli (001309.SZ), etc.; (3) Memory Interfaces: Lanqi Technology (688008.SH), Juchen Shares (688123.SH), etc.; (4) Memory Testing and HBM Industry Chain: Changdian Technology (600584.SH), Tongfu Microelectronics (002156.SZ), etc.

Risk Warning: Demand recovery falls short of expectations, intensified industry competition, and delays in new product research and development progress for companies.