China's push for self-reliance in high-end chips drives DRAM price surge

DRAM prices have soared after doubling in a month due to speculation that Chinese manufacturers are phasing out production to focus on AI chips and boost self-reliance in semiconductors. SK Hynix, Samsung Electronics, and Micron Technology control 90% of the global DRAM market. The price hike is expected to continue as demand for standard DRAM remains high.

DRAM prices have surged, doubling in just a month, driven by speculation that Chinese manufacturers are shifting production focus towards artificial intelligence (AI) chips to bolster the country's self-reliance in semiconductors. SK Hynix, Samsung Electronics, and Micron Technology control approximately 90% of the global DRAM market, further exacerbating the supply-demand imbalance [1].

The price hike is attributed to several factors. First, the shift in production priorities by Chinese manufacturers is leading to reduced supply of standard DRAM chips. Second, the global demand for DRAM remains robust, particularly in sectors like AI, data centers, and consumer electronics. The combination of these factors has led to a significant increase in DRAM prices.

The semiconductor industry is experiencing a wave of consolidation and investment in AI chip technologies. Major players like Meta and Amazon are unveiling new AI chip strategies, while traditional players like Marvell and Micron are seeing momentum in high-bandwidth memory (HBM) and connectivity solutions [1]. This shift in focus is likely contributing to the reduced supply of standard DRAM chips, as manufacturers prioritize AI-related products.

The situation is further compounded by geopolitical tensions and export restrictions. The Dutch government has moved to limit ASML's exports of advanced EUV tools to China, creating potential revenue uncertainty for the company but reinforcing nearshoring demand in allied regions [1]. Additionally, the U.S. has paused new Section 301 tariffs on Chinese semiconductors, providing temporary relief but leaving long-term policy friction unresolved [2].

Looking ahead, the continued investment in custom AI silicon strategies and the diversifying LLM workloads are expected to sustain demand for high-end DRAM. However, the effectiveness of the CHIPS Act will hinge on resolving labor bottlenecks and clarifying funding approvals. Investors should closely monitor potential M&A activities in the fabless design space as firms seek scale and IP depth to remain competitive at 3nm and below [1].

References:
[1] https://www.vaneck.com/us/en/blogs/thematic-investing/semiconductor-industry-new-update/
[2] https://asia.nikkei.com/business/tech/semiconductors/dram-prices-soar-as-china-eyes-self-reliance-for-high-end-chips