A recent research note from Guotai Haitong Securities Co., Ltd. indicates that the memory storage industry has evolved from a beneficiary of AI computing power investments into a critical bottleneck restricting AI infrastructure development. The structural shortage driven by AI demand now permeates the entire supply chain, with the gap between supply and demand continuing to widen.
On the pricing front, the note suggests that the moderation in contract price increases observed in Q3 2026 is not a signal of a cyclical peak. The brokerage forecasts that the upward price trend is likely to persist through 2027. Long-term agreements are not viewed as a constraint on price upside but rather as a mechanism to make price trends more predictable, effectively trading short-term price elasticity for greater long-term profitability and cash flow visibility. The industry's focus is expected to shift from single-quarter price and profit elasticity toward multi-year earnings sustainability and capital return levels supported by strong cash flow generation, which should drive a re-rating of the sector's valuation multiple.
On the supply side, Guotai Haitong Securities Co., Ltd. believes that supply discipline remains underestimated by the market. Most of the incremental capital expenditure from memory manufacturers is being directed toward new plant construction and cleanroom facilities, with capacity expansion plans progressing in a phased manner. Actual new capacity additions in 2026-2027 are expected to be limited. Structurally, the market has already fully priced in weak demand from consumer end-markets, while demand from the data center AI segment continues to strengthen. With flexible capacity management, the marginal impact of traditional consumer terminals on the industry's supply-demand dynamics is diminishing and will not alter the trend of supply-demand imbalance and moderate price increases.
According to TrendForce forecasts, Q3 2026 contract prices for generic DRAM are expected to rise 13-18%, with NAND contract prices up 10-15%. In the spot market, most specifications of DDR3 through DDR5 continue to see price increases, while some DDR4 8Gb spot prices have declined slightly. For NAND, certain TLC NAND spot prices stabilized and rebounded in August, QLC NAND prices were flat month-over-month, and MLC NAND spot prices rose 12.1%-13.9% month-over-month, driven by manufacturers exiting or reducing production of that segment.
The brokerage interprets the slower Q3 contract price gains as a pause rather than a peak, reiterating that the AI-driven structural shortage spans the entire supply chain with a deepening supply-demand gap. South Korea's memory exports in July grew more than 2.7 times year-on-year, reaching $35.68 billion, a 276.9% increase. DRAM exports alone surged 394.6% to $21.23 billion, while NAND exports rose 285.6% to $1.78 billion. In June, South Korean semiconductor production, shipments, and inventory levels grew 2.2%, 3.1%, and 3.0% year-on-year, respectively.
Major Taiwanese memory supply chain players posted strong July revenue growth, with memory manufacturers, controller chip makers, and brand/module vendors seeing year-on-year increases of 424.4%, 371.0%, and 379.4%, respectively. Notably, Winbond expects DRAM supply tightness to intensify further in 2027, with some customers already negotiating long-term agreements covering 2029-2030.
Key risks highlighted include slower-than-expected technology development, overheating in AI investment, macroeconomic volatility, geopolitical tensions, and supply chain disruptions.