Storage chip stocks suffer heavy losses; concerns over Chinese competition and oversupply by 2029 rise
CNBC
1h ago
Ai Focus
Storage chip stocks tumbled significantly this week, with the market concerned about intensified competition from China and a potential oversupply in the coming years. Analysts and industry insiders are skeptical about whether the expansion of CXMT's production capacity will truly increase supply, but discussions regarding an oversupply of RAM in 2029 continue to simmer.
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Storage chip stocks suffered particularly severe selling pressure this week amidst broader stock market turmoil.

There are two concerns that are intensifying the pressure: market debates about whether Chinese competition is threatening the established giants in the memory chip industry, and when the market may shift to a situation of oversupply.

In the past five trading days, SK Hynix has fallen by 26%, Samsung by 22%, and Micron by about 11%.

China's concerns about competition

At the beginning of this week, the initial nervousness in the market came from ChangXin Memory Technology, a leading Chinese memory chip manufacturer, which announced plans to launch a server storage product based on a new architecture.

The design of CXMT will allow for higher storage density, which has raised concerns among outsiders that this breakthrough could lead to this Chinese company seizing a larger global market share from competitors such as Samsung, SK Hynix, and Micron.

However, some analysts question whether CXMT will be able to scale up the mass production of this advanced technology.

Quilter Cheviot, the Global Technology Research Director, stated on Wednesday in the program "Squawk Box Europe" on CNBC: "The problem, of course, lies in any changes to the architecture... You can produce the chips, but what is the yield? If the yield is only 50%, that means half of the chips are simply thrown away, because they are not functional at all."

Rosenblatt Securities Senior Research Analyst Kevin Cassidy also stated that these developments in CXMT are unlikely to bring more storage supply to the market.

Cassidy told CNBC: "We don't think this will change the supply and demand relationship."

Will there be an oversupply in 2029?

Traders are still discussing a commentary from a opinion column in "Daily Economic News." This newspaper is a well-known media outlet in South Korea, and a journalist in the article urges the South Korean government to prepare for the slowdown in the artificial intelligence boom and to seek and cultivate the next major growth engine.

According to CNBC, the author states that Professor Hwang from Seoul National University and the executive directors of the Korea Semiconductor Industry Association, Ahn Ki - hyun, predict that by 2029 there will be a "new supply glut" that will turn the storage market into a "red ocean." The author also mentions that by 2030, "the super cycle may end, and the industry could enter a downward cycle."

SpaceX and Tesla CEO Elon Musk responded to this article on X, stating that China 'will produce a large amount of RAM in 2028.'

Random Access Memory ( RAM ) is produced by companies such as SK Hynix, Samsung, and Micron, and Chinese CXMT also manufactures it.

If there is an oversupply of RAM in 2029, it will put another strain on storage shares, as prices will fall and profit margins will be squeezed. However, such a distant prediction has not yet been echoed by other analysts.

Normally, the largest customers for storage chips are consumer electronics companies, as storage is a key component of devices such as smartphones and laptops.

However, with the acceleration of the artificial intelligence boom, storage has also become a key component of NVIDIA's chips as well as other links in the data center supply chain. As demand rises and supply tightens, prices have seen unprecedented increases.

This has driven a significant increase in the stock prices of three major memory chip manufacturers: Samsung, SK, Hynix, and Micron. However, a key question facing investors is whether the typical boom-bust cycle of this industry is finally beginning to change.

In the past, storage prices would typically soar when demand exceeded supply, only to fall later as manufacturers increased production capacity and the market shifted to a situation of oversupply. Investors are trying to determine whether this cycle no longer exists, or whether fundamental changes have taken place within the industry.

Currently, all major storage chip manufacturers are expanding production, but it usually takes three to five years for a factory to go from construction to production.

This leads many analysts to expect that the shortage will not ease until 2028 – but this does not necessarily mean that prices will fall significantly.

Counterpoint Research It is expected that the price of another key storage type, DRAM, will decline by about 23% in 2028 compared to 2027. However, compared to 2025, the price of DRAM is still expected to rise by about 230%.

Counterpoint Research Senior Research Analyst Jeongku Choi told CNBC: "The current storage market is considered to be in an era of 'new normal', and the downward cycle will be different from in the past."

Suppliers and buyers sign long-term agreements ranging from 3 to 5 years ( LTA ), which involve large upfront payments as well as clear price ceilings and floors to ensure stability. Therefore, even in a downturn, it is not expected to see such sharp declines as in the past.

CNBC's Lisa Kim also contributed to this report.

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