Bank of America communicated with major storage manufacturers: the Middle East currently has minimal impact, February sales were exceptionally strong.

Bank of America communicated with major storage manufacturers: the Middle East currently has minimal impact, February sales were exceptionally strong.

The latest exchanges between Bank of America and more than 10 storage chip manufacturers and supply chain companies show that the impact of the Middle East conflict on the global storage chip supply chain is negligible. February sales data is surprising, indicating that industry profit margins will rise sharply.

On March 7, according to news from Chasing the Wind Trading Desk, the Bank of America Global Research team explicitly stated in its latest storage industry tracking report that the storage industry is currently in a super-cycle. The impact of the Middle East conflict on the storage supply chain is almost zero, because the storage chip industry chain is highly characterized by an internal cycle within Asia.

The report states that demand for DRAM and NAND remains strong, far exceeding current capacity. The average operating profit margin of the DRAM industry is expected to easily exceed 60%, and NAND over 30%. Korea's semiconductor exports in February surged 161% year-on-year, and Taiwan's Nanya Technology’s February sales soared 587% year-on-year, both confirming this judgment.

Minimal Impact from the Middle East Crisis, Demand Continues to Exceed Supply

This week, Bank of America discussed the impact of the Middle East conflict with more than 10 storage chip manufacturers and supply chain companies.

All interviewed storage manufacturers said that the Middle East conflict currently has almost no substantial interference with their business. This is because the storage chip industry chain is highly characterized by an internal cycle within Asia:

Production side: Over 95% of global storage chips are produced in Asia, materials used (such as helium from Japan) have ample inventory, and the level of localization is high;Equipment side: Semiconductor equipment comes from Asia, the US, and Europe, and is usually transported by air without passing through the Strait of Hormuz;Distribution side: Storage chip distribution is centered in Asia, especially HBM needed for Nvidia AI servers, which is produced in Korea and shipped to packaging/ODM companies in Taiwan.

The report says that although manufacturers are concerned that a prolonged crisis in the Middle East may drag down macro demand, current DRAM and NAND demand is extremely strong, far exceeding production levels. More importantly, manufacturers are actively negotiating long-term agreements (LTAs) to lock in multi-year average selling prices (ASP), signaling high confidence in the future of the industry.

From the price data, Bank of America states that DRAM spot prices are generally stable this week, but still more than 50% higher than last quarter; NAND spot prices, driven by expectations of ongoing shortages, surged over 10% this week compared to last week.

Specifically, the spot price for 16Gb DDR5 is $39.3, a year-on-year increase of 698%; the spot price for 16Gb DDR4 is as high as $77.2, up 2530% year-on-year.

February Sales Data Shocks Everyone: Super-cycle Features Fully Unveiled

The report notes that February sales data made the Bank of America team feel "surprised", with all indicators far exceeding expectations:

Korea Semiconductor Exports: February exports reached $25.2 billion, up 161% year-on-year, setting a new historical record and growing 22% month-on-month compared to January;

Nanya Technology, Taiwan: February monthly sales skyrocketed 587% year-on-year, marking seven consecutive months of triple-digit year-on-year growth, mainly driven by a sharp rise in DDR4 and DDR5 prices.

The Bank of America team pointed out that such strong revenue growth is mainly driven by rising prices for traditional storage chips (DDR4, DDR5, NAND) and product mix optimization (higher share of HBM3e and enterprise-grade SSDs). In this context:

The average operating profit margin in the DRAM industry is expected to easily exceed 60%;The average operating profit margin in the NAND industry is expected to exceed 30%;With new contract prices for DDR5 continuing to be raised, March sales, export, and profit margins are expected to further surpass those in February.

Considering that ASP is expected to continue rising (including new contract prices for DDR5), March sales, exports, and profit margins should further increase over February. Bank of America made an explicit statement:

"It is clearly a super-cycle."

 

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