I. Supply Side: Overseas IC Vendors Voluntarily Cut Capacity, Tightening Supply of DDR4 & DDR5 Simultaneously

The global DRAM market has long been dominated by three major overseas manufacturers: Samsung, SK Hynix and Micron, who act as the core driving force behind the current memory price hike.

1. Structural Capacity Shift & Cuts to Mature DDR4 Production Lines

To boost product gross profit margins, the three memory giants have continuously shut down and scaled back mature DDR4 wafer capacity, with no new DDR4 wafer starts planned. They fully allocate limited wafers and advanced process nodes to high-margin AI memory products such as HBM and high-frequency DDR5.

Vendors have gradually marked DDR4 as NRND (Not Recommended for New Designs), leading to shrinking circulating memory particles in the market. Customers with rigid demand from industrial control, automotive and edge server sectors rush to stock up, steadily pushing up spot prices of DDR4.

2. Reduced Capital Expenditure & Slower Capacity Expansion

Following the previous severe downturn cycle of memory prices, overseas manufacturers drastically cut capital expenditure and suspended new wafer fab construction plans. Even amid skyrocketing demand for AI memory, new capacity takes 18 to 24 months to come online, failing to fill market shortages in the short term. Persistent supply-demand gaps keep chip quotations elevated.

3. Limited Advanced Process Capacity, Shortage of High-End DDR5

High-frequency DDR5 running at 7200Mbps and 8000Mbps relies on advanced process nodes of 1c and below, which deliver low wafer throughput. Leading cloud vendors and AI server enterprises secure capacity via annual long-term contracts in advance, leaving very few chips available for the spot market. Both contract and spot prices of high-end DDR5 surge in tandem.

  II. Demand Side: Explosion of AI Computing Power Generates Massive New Memory Demand, Creating Resonant Demand Across All Segments

Unlike previous price cycles driven solely by consumer electronics, the current memory rally is underpinned by long-term rigid incremental demand brought by AI computing.

1. Massive Consumption of High-End DDR5 by AI Servers

Large model training and cloud inference servers require exponentially higher memory capacity and bandwidth, with a single AI server carrying several times more memory than a traditional general-purpose server. Global computing centers keep expanding, creating rigid demand for high-frequency DDR5 RDIMMs that continuously absorb new DDR5 capacity from vendors, resulting in prolonged shortages of high-end memory.

2. Long-Term Rigid Demand for DDR4 Locked by Industrial & Automotive Sectors

Hardware certification cycles for industrial control equipment, network switches, security NVRs and smart cockpit devices span several years, with equipment lifespans of 5–10 years, making rapid migration to DDR5 unfeasible.

Coupled with rising penetration of new energy vehicles, procurement volumes of automotive-grade DDR4 and LPDDR4X grow year by year. Amid shrinking vendor DDR4 capacity, downstream enterprises place large long-term orders in advance to guarantee supply, amplifying short-term demand and further driving DDR4 price increases.

3. Replacement Demand from Consumer Market Underpins Overall Consumption

A vast installed base of PCs sustains steady DDR4 consumption through memory upgrades for legacy desktops and affordable office machines. Meanwhile, AI PCs and high-end gaming laptops widely adopt DDR5, forming stable dual-spec demand in the consumer segment that further absorbs existing memory capacity.

  III. Shift in Industry Business Model: Long-Term Contracts Dominate the Market, Spot Inventory Scarce

Historically, the memory market featured a large share of spot trading with extreme price volatility; the industry landscape has undergone a fundamental transformation today.

Leading cloud operators, server brands, vehicle manufacturers and industrial enterprises all lock in wafer capacity in advance via quarterly or annual long-term contracts. Most vendor capacity is allocated to contracted orders, drastically reducing chips flowing into spot circulation. Small and medium purchasers and traders compete for the remaining spot stock, where excess demand pushes spot prices sharply higher, creating a pattern of moderate contract price hikes paired with steeper spot price growth.

  IV. Restructuring of Industrial Chain Inventory: Proactive Stockpiling by Downstream Players Amplifies Demand

After the previous round of memory price declines, downstream terminal and module manufacturers maintained minimal inventory levels. As AI demand booms and vendors signal clear production cuts, widespread market expectations of sustained supply shortages prompt enterprises to build precautionary stockpiles and ramp up memory purchases, temporarily inflating short-term market demand and fueling further price gains.

Meanwhile, overseas vendors keep raising contract prices, forming a broad upward price expectation across the industrial chain. Traders hoard inventory and hold back sales, exacerbating tight supply sentiment.

  V. Domestic Substitution Cannot Fully Offset Supply Shortages in the Short Run

ChangXin Memory has achieved mass production of DDR4 and DDR5, easing domestic supply chain pressure to a certain extent. However, constrained by advanced process limitations, capacity scale and high-end manufacturing technologies, domestic memory output can only cover mid-to-low-end consumer and industrial control markets. Supply of high-end DDR5 for AI servers and HBM remains highly dependent on the three major overseas vendors. Domestic capacity is unable to fill global supply-demand gaps in the near term and cannot reverse the upward price trend.

  VI. Conclusion

The sustained rally in memory chip prices stems from the combined effects of contracting supply, rigid incremental demand from AI computing, capacity locked by long-term contracts and concentrated downstream stockpiling.

In the short term (2026–2027), supply-demand imbalances will remain unresolved, keeping DDR4 and DDR5 prices at elevated levels. In the medium to long term, price pressure will only ease once new wafer capacity goes online and DDR5 cost reduction completes full market substitution.

Distinct from traditional cyclical downturns in memory, the long-term rigid demand driven by AI computing power has greatly weakened the industry’s cyclicality, supporting sustained strong prosperity for memory chips.