As the memory industry rides the AI boom, cloud service providers (CSPs) are placing orders that upstream memory foundries were unprepared for. Adata's chairman, Simon Chen, confirmed that this wave of memory supply shortages has spread across the four major product lines: DRAM, NAND Flash, solid‑state drives (SSDs), and traditional hard drives (HDDs). Such a phenomenon is almost unprecedented in the history of the memory industry, and the competition for goods is no longer among peer module makers but against CSPs with orders of magnitude larger. Additionally, there is no overlap in duplicate orders.
Critically low inventories and rising prices
Chen stated that even upstream memory foundries have trimmed their fourth-quarter inventories to rock bottom, down to only 2 to 3 weeks' worth. He expects prices to continue rising into the first half or even the latter half of 2026.
Although Adata still holds inventory worth billions of NT dollars, supplies remain insufficient, so the company must ration sales. Starting in October, revenue will need to ease back. The capacity shortage in 2026 is anticipated to be even greater than in 2025. The target is to raise inventory levels toward NT$20 billion (approx. US$651.4 million), but it will be difficult with all players aggressively scrambling for goods.
Foundries struggle to keep up
Samsung Electronics and SK Hynix are currently expanding production as scheduled. DRAM and NAND output is being increased by about 15-30%. Although foundries anticipated a market rebound, the supply crunch and price surge intensified abruptly in August 2025, throwing the companies off guard. Even if new capacities and equipment deployments are accelerated, it takes at least two and a half years from construction to production, so short-term supply tightness will persist.
Having worked in the memory industry for around 30 years, Chen shared that this is the first time he has seen simultaneous shortages in DDR4, DDR5, NAND, and HDD. The memory industry has historically followed a cyclical pattern, with each cycle lasting about 3.5 to 4.5 years. However, this AI-driven cycle is abnormal; the upward cycle is being stretched, and cyclical regularity may be disrupted. Downstream customers expect the shortage boom to last at least four years or more.
CSPs replace module makers as key competitors
According to Chen, upstream foundries are gaining confidence from their large orders. Through maximal allocation of capacity, they achieve the highest profit margins. In the past, module makers were their rivals in fighting for stock; now the competition for capacity is with CSP giants.
Previously, it was common practice for upstream foundries to maintain two to three months of safety stock. But in the fourth quarter, even upstream inventory has hit bottom with absolutely nothing left; everything has been allocated.
AI servers receive top priority in foundry supply; next are general-purpose servers, followed by PCs, then smartphone OEMs. Other markets must fight over what remains. Contract prices are expected to rise by 20-30%, and spot prices may increase more, especially DDR4 DRAM, which is seeing explosive price growth.
DDR4 phase-out intensifies shortage risks
Samsung, SK Hynix, and Micron have all announced full DDR4 discontinuation, gradually shifting to DDR5 production. This production cease is expected to trigger a domino effect. No additional production will be made after the supplies from existing contracts end. Once production equipment is repurposed or unloaded, it will not revert. Only a minimal capacity will be reserved for certain long-term contract customers. As a result, supply will only shrink further, and DDR4 is expected to remain scarce for two years. This is favorable to Taiwanese firms such as Nanya and Winbond.
Supply is also tight for NAND Flash. Although there are as many as seven to eight suppliers, AI-driven demand for SSDs is surging, and HDD manufacturers are cutting production or shifting to order-by-order manufacturing modes. This prompts customers who had used HDDs to switch to SSDs, further increasing NAND Flash demand. NAND shortages are expected to persist into the first half of 2026.
Winners and losers in the new memory economy
Chen believes that the memory shortage phenomenon will widen the gap between winners and losers; those with products and capacity will thrive, while module makers will depend on how well they can stockpile. Those unable to secure supplies will face increased operational pressure. For the time being, Chen's sales team has been instructed to sell sparingly and to give priority to loyal customers.
Article edited by Jack Wu
