How much longer can storage prices rise?

Recently, there have been market reports indicating that the prices of some eMMC spot channel products have fallen below original factory contract prices, leading to an inversion. eMMC is an embedded memory chip widely used in consumer electronics such as set-top boxes, smart TVs, and entry-level smartphones. Given that the storage industry is currently experiencing a boom, what has caused this inversion phenomenon in this category? Is this occurrence also happening with other storage products? Does it indicate that the upward trend in the storage industry is nearing an inflection point? With these questions in mind, a reporter from the Financial Associated Press recently spoke with multiple industry insiders. Wu Peidong, Managing Director of Wan Chuang Investment Bank, told the reporter that the current inversion in eMMC prices is structural and primarily occurs in low-capacity products made with MLC particles (a type of memory medium that is gradually being phased out by manufacturers and is one of the core categories of niche storage). The reason for this is that upstream resource costs have surged greatly, while downstream demand has not been able to absorb these costs. According to TrendForce data, the contract price for MLC is expected to reach a historical high in the first half of 2026. A visit to the North Storage counter in Shenzhen Huaqiang Industry revealed that merchants currently report having low-capacity spot goods, while large-scale high-capacity spot goods are rare. For mainstream DRAM and NAND products, contract prices are still rising, but some consumer-grade storage products are stabilizing in price or experiencing slight declines due to inventory buildup, leading to a divergence in the trends between high-end storage and consumer-grade storage. Several analysts believe that under the influence of Long-Term Agreements (LTA), the price increase for relevant products in the second half of the year will also moderate. They argue that 2027 will be the true observation year for market trends as storage capacity begins to be released. Why is there an inversion in some eMMC products? CFM flash memory market analyst Dai Xiaoyu stated in an interview that the inversion of prices, where spot market prices are lower than original factory contract prices, mainly occurs with low-capacity eMMC products, particularly the 64GB eMMC. She explained that since the second quarter of this year, the trade market has accumulated a significant amount of 64GB eMMC supplies from original manufacturers and various storage brands. Due to a lack of actual demand, these products can only circulate among traders, making effective consumption difficult. As a result, storage manufacturers often push transactions based on negotiated pricing, with actual transaction prices continuing to decline. The direct cause of the inversion is the structural imbalance brought about by a contraction in MLC particle supply. By the end of June this year, Samsung had completely stopped the production of MLC NAND products, becoming another manufacturer to exit this product line recently, leaving only five suppliers globally in the open market for MLC NAND. Data from TrendForce shows that in September 2024, the contract price for 32GB MLC was around $2, while by June of this year, it had risen to approximately $17, an increase of about eight times. The inversion of the 64GB product relates to the uniqueness of this specific model. MLC is primarily used for small capacity eMMC ranging from 8GB to 64GB. Suppliers originally expected to guide downstream customers to upgrade directly from small capacities to the 64GB solution that has begun using TLC NAND particles, based on price increases in small capacities, and accordingly planned extensive supply layouts for 64GB. Dai Xiaoyu noted that the demand from downstream customers for small capacities is stable and their purchasing cycles are long, making it difficult to accept significant changes in a short time. Coupled with the overall sluggish demand in the consumer sector, the growth in demand for upgrading from small capacities to 64GB is far below suppliers' expectations. This has directly led to a decline in the spot selling price of 64GB eMMC while the contract price continues to rise. However, an observation of the price trends for this category over the past six months shows that even with the current price reduction, it remains higher than at the beginning of this year. Therefore, the inversion does not imply that channel merchants will incur losses from sales but rather serves as a method to increase cash flow turnover. Merchants in Huaqiangbei have also informed the reporter that whether prices will invert is attributed to the sales strategies of the merchants, but selling at a loss is "unlikely." Considering the market scale, niche storage, including eMMC, accounts for about 10% of the entire storage market, with the mainstream market still dominated by PCs, smartphones, and servers. The inversion in eMMC pricing has become one of the focal points of recent market attention, but it has limited actual impact on the overall prosperity of the industry. How much longer can prices continue to rise? Looking at the overall storage market, contract prices for storage continue to rise, but the rate of increase is gradually narrowing each quarter, with further divergence between the consumer and server markets. The narrowing of the price increases is related to LTAs forming a "ceiling" effect on prices. According to Dai Xiaoyu's observations, under the framework of long-term agreements, current storage prices have approached the limits set by contracts, with only customers who have not signed long-term agreements and new demand transacting at more market-driven prices. She anticipates that the price fluctuations for DRAM and NAND in the second half of the year will be very limited. According to TrendForce data, the overall structure of DRAM is expected to remain extremely tight in the third quarter of 2026, but due to a downturn in consumer-grade application demand and the high base effect, the rate of increase in contract prices is expected to converge, with a quarter-over-quarter increase of 13%-18%, down from 58%-63% in the second quarter. The overall NAND Flash contract price is expected to see a quarter-over-quarter increase of 10%-15% in the third quarter, a drop from the 50%-60% seen in the second quarter. By category, server DRAM continues to be the strongest demand area. Despite being constrained by long-term agreements and other factors, TrendForce still states that as the supply-demand imbalance continues, there could be future situations where manufacturers compete to raise prices. In contrast to the server's price increase driven by demand, the situation on the consumer side is more complex. Morgan Stanley's research report predicts that in the fourth quarter, the price increases for DRAM in smartphones and PCs will narrow to 0%-5%. The CFM flash memory market also anticipates that the upward momentum for consumer-grade NAND and SSD contract prices has basically exhausted by the fourth quarter. The pressure on the consumer side is nearing a critical point. According to Counterpoint Research data, in the second quarter of 2026, China's smartphone shipments decreased by 2% year-on-year, with a 3% decline in the first half of the year. In the first quarter of this year, domestic Android brands cut orders for NAND and DRAM in smartphones by about 10% to 20%, and most manufacturers promptly redirected their corresponding production capacity to the server market. Counterpoint Research's senior analyst Shenghao Bai stated that smartphone memory prices increased by over 80% quarter-on-quarter in the second quarter, with DRAM surpassing SoC (system-on-chip, the core processor of smartphones) to become the single most expensive component in flagship smartphones. For low-end models with wholesale prices below $200, the BOM (bill of materials) cost increased by 70% year-on-year, almost entirely driven by storage. Dai Xiaoyu remarked that many consumer-grade clients can no longer support the continued procurement of high-priced goods. It is worth mentioning that there have been market rumors suggesting that smartphone brands have refused to accept price increases from manufacturers. Dai Xiaoyu believes that such rumors are more like a negotiation strategy, as manufacturers have made their stance clear: if consumer clients do not want the products, production capacity can be immediately shifted to AI applications. In the spot market, the era of easily making profits by hoarding a particular storage product has come to an end, and there is an even more pronounced divergence between server-related products and the consumer side. A storage dealer told the reporter that the current price of a brand-new DDR5 64G 5600 memory stick for servers has reached $3,000 each, compared to a transaction price of $2,400-$2,500 for this model just two or three months ago. Data from the flash memory market indicates that the spot price increase for DDR5 RDIMM 32GB products reached 23% in July. On the consumer side, taking the DDR4 UDIMM 8GB 3200 memory stick primarily used for desktop computers as an example, its industry price peaked at $96 in March this year but has since fluctuated downward to $70 this week. However, this product's industry price a year ago, in August 2025, was only $14. Although its price has dropped by nearly 30% from the peak, it is still five times higher than the same period last year. TrendForce analyst Ao Guofeng told the reporter that the sales volume in the spot market has declined compared to the same period last year, and the potential for price increases in the future may be limited. Dai Xiaoyu, on the other hand, believes that the entire spot market will mainly experience fluctuations going forward, alternating between rises and falls. 2027 will be the true examination year The outlook for the storage industry chain in 2026 is essentially certain. Wu Peidong stated that long-term agreements for storage have already been locked in until the second half of next year, making this year a definitive prosperous year. However, 2027 is expected to be the real observation year, and the trends in DRAM and NAND will diverge. Data from TrendForce indicates that the supply-demand ratio for DRAM in 2026 will be between -1% and -2%, and this gap is expected to widen further in 2027. Recently, SK Hynix Chairman Choi Tae-won stated that all customers are requesting supply volumes nearly double their original demand. He previously predicted that AI semiconductor demand will grow by 60% to 100% compared to 2026. The proportion of HBM (High Bandwidth Memory, the core memory product used in AI accelerators) in DRAM wafer production is expected to rise from about 22% in 2026 to approximately 30% in 2027. However, since producing HBM wafers consumes about three times the resources of general DRAM, its effective contribution to DRAM supply will only increase from 9% to 13%, meaning the supply-demand gap for general DRAM will be further widened due to HBM's rapid expansion. Storage manufacturers are accelerating capacity expansion to meet demand, with several agencies estimating that the capital expenditures of three overseas storage manufacturers will exceed $120 billion in 2026. However, due to constraints in construction periods, equipment relocation, and raw material procurement, it is expected that most new factories will begin production in the second half of 2027, and significant output contributions are likely to materialize by 2028. The situation for NAND is somewhat different. TrendForce expects the supply-demand ratio for NAND to turn positive in 2027, moving from a tight supply-demand situation to a looser one, primarily due to major manufacturers accelerating the upgrade to higher-layer products while new factory capacities are gradually released, leading to an increase in bit supply growth surpassing that of 2026. Nevertheless, TrendForce also pointed out that if breakthroughs are made in the adoption of Agentic AI (an AI application mode capable of autonomously executing complex tasks), the demand for high-speed SSDs may once again surge, bringing supply and demand closer to balance. Wu Peidong predicted that another important variable in 2027 will be the release of production capacity in China. "CXMT Corporation's new plant in Shanghai and Yangtze Memory Technologies' factory in Wuhan are both planned for mass production in 2027, which will materially shift the supply-demand balance. However, Changxin has clearly stated that it will not sell at low prices, and its pricing will not be lower than that of Samsung or Hynix, so the additional production capacity will primarily fill gaps rather than drive prices down." Wu Peidong further stated that while the rate of storage price increases may be narrowing, the overall trend remains upward. Even if prices do eventually decrease, it will be a gentle return to historical averages, rather than a collapse. "This cycle has a strong supply discipline, a high proportion of long-term agreements, and an elevated baseline for domestic prices. Even if there is an oversupply, the downward slope will be much gentlerthe industry will transition from extraordinarily high profits to normal profit levels, rather than returning to an overall loss situation." Dai Xiaoyu additionally cautioned, "The main contradiction in the current market arises from concerns regarding potential bubbles in AI development and the resulting uncertainties about future storage prices." Returning to the A-share market, module manufacturers collectively saw a surge in performance in the first half of the year. Shenzhen Longsys Electronics reported a net profit attributable to shareholders of 10.577 billion yuan for the half-year, Biwin Storage Technology expects a net profit attributable to shareholders of 7 billion to 7.5 billion yuan, and Shenzhen Techwinsemi Technology anticipates a net profit attributable to shareholders of 5.7 billion to 6.5 billion yuan for the half-year. However, during the performance announcements, many companies stock prices have retraced more than 40% from their peaks, with Shenzhen Techwinsemi Technology experiencing a continuous decline in multiple trading days following their announcement due to a sequential drop in net profit in the second quarter. Wu Peidong believes that the market had previously priced in the future prosperity over the next two to three years, and the drop in July was a correction of expectations. The A-share market also exacerbated emotional responses, with some stocks nearing a halving, while global storage stocks generally only corrected by 20% to 30%. Going forward, the divergence will accelerate, and companies with inventory, long-term agreements, and products transitioning towards enterprise-level and automotive applications will gradually be validated, while purely channel-focused companies are likely to be outperformed. Consumer-grade storage products are an important shipment category for domestic module manufacturers. When upstream wafer prices continue to rise while downstream demand fails to catch up, the profit margins for module manufacturers are squeezed from both sides, which is one of the driving factors pushing them to accelerate their transition to higher-value products. In Dai Xiaoyu's view, the logic of module manufacturers profiting from hoarding inventory will gradually weaken. In a scenario where procurement costs converge, their most pressing strategic shift will be how to transform high-cost products into high-value offerings for high-value clients in automotive, industrial, and server applications. This article is reprinted from the Financial Associated Press, edited by Chen Yufeng.