SK Hynix Announces 20% DDR5 Price Hike!

As major memory chip manufacturers like SK Hynix, Micron, and Samsung pivot their production capabilities towards meeting the high-bandwidth memory (HBM) demands driven by AI, the supply of DDR5 memory is seeing a marked decrease. Recent reports from the supply chain indicate that SK Hynix has notified its partners of a forthcoming 15% to 20% price increase for DDR5, with Samsung and Micron expected to implement similar price hikes soon.

SK Hynix has publicly announced that its HBM production capacity for 2024 has already been fully booked, and even the 2025 capacity is nearly sold out. To meet the growing demand, SK Hynix is reallocating over 20% of its existing DRAM production capacity to HBM. Samsung is also aggressively pursuing this shift, reportedly planning to convert approximately 30% of its DRAM capacity to produce the more profitable HBM.

HBM is a crucial component for AI chips, and as the demand for AI chips escalates, the need for HBM has surged beyond supply capabilities. SK Hynix currently leads the HBM market, with Samsung making significant strides to catch up. Samsung's recent success in passing NVIDIA's validation means it can now supply HBM to NVIDIA on a large scale, potentially increasing its market share and narrowing the gap with SK Hynix.

Micron has previously highlighted in its financial reports that HBM3e production consumes roughly three times the wafer supply compared to DDR5 at the same technology level. Consequently, SK Hynix's shift of over 20% of its DRAM capacity to HBM production will result in only about a one-third increase in HBM capacity. Similarly, Samsung's reallocation of 30% of its DRAM capacity to HBM production is expected to yield only a one-third increase in HBM output.

While this strategic reallocation of DRAM capacity to HBM production by SK Hynix and Samsung may help alleviate the current tight supply of HBM, it is also expected to significantly reduce the availability of standard DRAM products like DDR5. Given that Samsung and SK Hynix together hold around 75% of the global DRAM market, this shift is anticipated to lead to a global shortage of DDR5 and other standard DRAM products, pushing prices higher.

SK Hynix's price increase for DDR5 primarily targets contract prices, with module manufacturers looking to elevate spot prices in response, potentially benefiting from low-cost inventory.

In the midst of expanding HBM production by major manufacturers and the resulting tight supply and price increases for DDR5, Nanya Technology has recently begun shipping its 16Gb DDR5, developed using its proprietary 1B process technology. Additionally, ChangXin Memory Technologies launched its DDR5 products in the latter half of last year, both positioned to capitalize on the current market trends.

As DDR5 prices are expected to rise significantly, DDR3 is also experiencing price increases due to the gradual discontinuation by leading manufacturers. Industry reports indicate that Samsung plans to cease DDR3 production by the end of the second quarter this year to focus on HBM and DDR5. SK Hynix has already transitioned its Wuxi plant from DDR3 to DDR4 production, effectively ending its DDR3 supply. Micron has also significantly reduced its DDR3 production in its efforts to expand DDR5 and HBM capacity.

With the world's top memory manufacturers reducing or stopping DDR3 production, supply has sharply declined. Despite this, large end markets such as IoT, networking, and automotive continue to rely heavily on DDR3. The integration of AI technology into these sectors has further increased DDR3 demand, leading to a roughly 20% price increase in the first half of the year.