Why are memory prices skyrocketing, and what should purchasers do?

Currently, memory prices are surging significantly due to the explosion in AI demand. As a purchaser, the situation is indeed severe, but there is still room for maneuver. The market has shifted from cyclical shortages to an AI-driven structural shortage phase, which is expected to last until 2027. This assessment forms the basis for formulating response strategies.

Root Causes of Price Increases:
The fundamental reason for this price surge is that global memory giants (Samsung, SK Hynix, Micron) are shifting a significant portion of their production capacity originally used for standard memory towards higher-margin High Bandwidth Memory (HBM) for AI servers and accelerators, as well as enterprise-grade products. This has resulted in the following specific impacts:

1. Extreme Supply-Demand Imbalance: The production of 1GB of HBM consumes the wafer capacity required to produce approximately 4GB of standard DRAM. This drastically squeezes the supply of conventional memory. Analysis suggests that by 2026, AI-related applications could equivalently consume nearly 20% of the global total DRAM production capacity.
2. Changed Market Dynamics, Marginalization of Smaller Customers: Suppliers have gained absolute dominance, and the market has entered a seller's market. Leading suppliers are adopting a customer-picking strategy, prioritizing the signing of Long-Term Agreements (LTAs) with top-tier PC manufacturers like Apple, Dell, Lenovo, and ASUS to secure their stable production. Consequently, numerous small and medium-sized manufacturers struggle to obtain stable supply and fixed prices, facing significant challenges in procurement costs and supply chain stability.
3. Severe Price Trends: Data shows that DRAM prices in Q3 2025 increased by over 170% year-over-year. Industry experts predict that memory prices will not decline in 2026 and could potentially rise by another 40% in the following quarter. The market anticipates shortages lasting at least until Q4 2027.

How Should Procurement in Manufacturing Companies Respond?
Against this backdrop, strategies need to be adjusted immediately, shifting from passive purchasing to active management.
For example:
1. Adjust Internal Demand, Reduce Procurement Pressure: Evaluate whether the memory configuration for all projects is necessary, and if specifications can be lowered or existing inventory can be substituted.
2. Extend Lifecycles: Postpone equipment refresh and upgrades for non-critical projects to reduce new purchases. Alternatively, adopt tiered configuration: consider configuring smaller memory capacities for scenarios with lower performance requirements.
3. Optimize Supplier Management and Procurement Models, Lock in Existing Core Suppliers: Strengthen communication with existing suppliers to explore the possibility of signing secured long-term agreements, even at slightly higher prices.
4. Seek Alternatives: Proactively evaluate products from Chinese or other brand suppliers such as Yangtze Memory (YMTC), ChangXin Memory Technologies (CXMT), and GigaDevice.
5. Expand Sourcing Scope: Extend from Tier-1 distributors to capable Tier-2 channels or authorized distributors, but caution is needed to mitigate risks and verify product sources.
6. Increase Safety Stock: Within acceptable capital cost limits, appropriately raise the safety stock level for critical memory models to buffer against price and supply fluctuations.
7. Optimize Procurement Rhythm: Adopt a small batch, high frequency purchasing approach to avoid large single purchases at price peaks. Simultaneously, closely monitor market reports and time orders for relatively stable price periods.
8. Actively Communicate Internally: It is essential to clearly communicate to management, finance, and business departments the fundamental changes in the market, the inevitability of price increases, and supply risks, working together to adjust budgets and project expectations.

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