Surging demand for NAND flash, fuelled by artificial intelligence workloads and data centre expansion, is pushing memory makers into a new investment cycle, with Samsung Electronics and SK Hynix accelerating capacity plans after years of restraint.
Prices ignite
NAND prices are rising sharply as supply struggles to keep pace with AI-driven demand. Benchmark contract prices for standard NAND products climbed nearly 40% month-on-month to US$17.73, roughly eight times higher than levels seen in early 2025.
The shift reflects a broader change in how AI infrastructure consumes memory. Beyond model training, inference workloads are increasing storage intensity, lifting demand for enterprise SSDs. A concurrent four-to-six-year server replacement cycle is adding further pressure.
Supply, however, remains tight. After a prolonged downturn, memory makers cut NAND output and prioritised DRAM and high-bandwidth memory (HBM), leaving NAND capacity expansion lagging behind the current demand cycle.
No quick fix in sight
Even with renewed investment, supply growth is expected to remain constrained. Samsung and SK Hynix continue to prioritise DRAM, while capacity additions from Kioxia and Micron are unlikely to close the gap quickly.
Samsung is advancing process upgrades at its Xi'an fabs in China, with further expansion under review. SK Hynix is planning new capacity at its Dalian facility, targeting up to 50,000 wafers per month. Both companies are also evaluating new domestic capacity, including Samsung's Pyeongtaek campus and SK Hynix's Yongin cluster.
Industry estimates suggest NAND supply will remain structurally tight through the year, supporting continued price strength.
Samsung pivots back to NAND at P5
Against this backdrop, Samsung has decided to expand NAND capacity at its under-construction P5 fab in Pyeongtaek, marking its first meaningful NAND expansion since P3 around five years ago, according to The Bell and Chosun Biz.
The move signals a shift in capital allocation. Since 2022, Samsung had largely halted new NAND line construction, focusing instead on DRAM investment while limiting NAND spending to process conversions.
At P5, a six-phase mega fab, Samsung is expected to deploy a 10th-generation NAND production line. One phase is likely to be allocated to NAND, with the overall investment scale remaining flexible depending on market conditions.
The project timeline has also been brought forward. Cleanroom construction, initially scheduled for late 2026, has been accelerated due to supply-demand imbalances, with operations now expected around mid-2028.
Margins rebound, capex follows
The renewed investment reflects a sharp recovery in NAND profitability.
Industry estimates suggest Samsung's NAND mix margin approached 50% in the first quarter of 2026, supported by higher average selling prices. The company is also reported to have generated more than KRW10 trillion (approx. US$6.77 billion) in operating profit from NAND in the same period, with margins potentially exceeding 60% in the second half of 2026.
This marks a turning point for the segment. NAND, previously deprioritised during the downturn, is regaining strategic importance as AI demand shifts from compute-intensive training to storage-heavy inference.
The long game begins
Samsung's investment at P5 is expected to extend further, with plans underway for a parallel "P5 Fab 2" with a similar multi-phase structure, signalling a longer-term commitment to scaling NAND capacity.
Still, the industry faces a timing gap. New capacity will take years to come online, while demand continues to rise.
The result is a familiar but potent setup for the memory market: a capex recovery is underway, but supply tightness — and elevated pricing — is set to persist.
Article translated by Levi Li and edited by Jerry Chen
