global memory chip shortages are expected to persist, potentially extending beyond 2026, fueled by strong demand from the artificial intelligence sector.Micron Technology has cautioned about ongoing supply constraints, while TrendForce projects significant growth in the memory sector through 2027, potentially leading to continued price hikes if supply doesn’t increase.
Micron Technology and the Memory Chip Supply
Micron Technology, a leading manufacturer of memory and storage solutions, has warned that the current supply of memory chips is highly likely to remain constrained for an extended period. This limitation is primarily driven by the escalating demand for high-bandwidth memory (HBM) used in artificial intelligence applications.
According to Micron’s CEO, Sanjay Mehrotra, during the company’s Q1 2024 earnings call on December 20, 2023, the demand for memory is exceeding supply, and this imbalance is expected to continue throughout 2024 and potentially beyond. Micron Q1 FY24 Results
For example, Micron reported a 35% increase in revenue from its data centre buisness in Q1 FY24, largely attributed to the growing demand for HBM.
TrendForce Market Forecasts
TrendForce,a global provider of market intelligence,anticipates considerable expansion in the memory sector through 2026 and 2027. This growth is projected to be driven by the increasing adoption of AI technologies, which require significant amounts of memory capacity.
TrendForce estimates that the DRAM market will experience a compound annual growth rate (CAGR) of approximately 20% between 2023 and 2027. TrendForce DRAM Market Analysis. This growth is considerably higher than previous forecasts, reflecting the unexpected surge in AI-related demand.
Specifically, TrendForce highlights the increasing demand for HBM3 and HBM3e, which are crucial for training and deploying large language models (LLMs). The limited capacity of HBM production is a key factor contributing to the ongoing supply shortage.
Potential for Continued Price Increases
If the supply of memory chips remains limited, distributors are likely to continue increasing prices. The imbalance between supply and demand creates a favorable environment for price hikes, especially for specialized memory types like HBM.
According to a report by DRAMeXchange, a division of TrendForce, spot prices for certain DRAM modules have already increased by over 20% in the first quarter of 2024.DRAMeXchange Spot Price Report
This trend is expected to continue as AI companies compete for limited memory resources, driving up costs for consumers and businesses alike. The situation is further elaborate by geopolitical factors and potential disruptions to the supply chain.
