South Korea invests heavily in building factories = Has the memory cycle peaked?

The large-scale storage chip industry cluster construction plan led by the South Korean government has raised market concerns about the peak of the storage cycle, but Bank of America analysts believe that such concerns are clearly exaggerated, and the fundamentals of the current storage industry remain strong.

The South Korean government plans to invest 800 trillion won in the southwestern region (such as Gwangju) to build a new storage chip manufacturing cluster. Some investors interpret this as a signal that the upward cycle of storage is about to end. However, according to Chase Wind Trading Desk, Bank of America Securities analyst Simon Woo's latest report clearly states that the cluster is not expected to generate meaningful chip production capacity before 2033. It is a long-term plan focused on expanding the Yongin/Pyeongtaek industry cluster (2026 to 2035) and has limited impact on the supply and demand pattern in the near and medium term.

Meanwhile, spot and contract prices for storage chips continue to rise, South Korea’s semiconductor exports in June surged to $44.8 billion, up 21% month-on-month and 199% year-on-year, marking six consecutive months of triple-digit year-on-year growth.

TrendForce has also significantly raised its forecast for DRAM average price increases in Q3 from the previous 3%-8% to 13%-18%. These data show that the storage industry is still in a strong channel of simultaneous volume and price growth, and the assertion of the cycle peaking lacks data support.

Plant construction plan’s capacity landing is far off, short-term worries are overinterpreted

The 800 trillion won storage industry cluster construction plan led by the South Korean government is the direct trigger for current market concerns. However, Bank of America Securities analysts emphasize that the plan is an ultra-long-term strategic layout, and it is not expected to produce substantial chip outputs before 2033.

From the timeline, the near-term expansion focus of South Korea’s storage industry remains on the existing clusters in Yongin and Pyeongtaek, with a planning cycle from 2026 to 2035.

The construction of the new cluster in the southwest belongs to the follow-up stage, and its impact on the global storage supply landscape will not be evident until after the current cycle ends. Thus, Bank of America Securities believes that there are currently no signs of the storage cycle peaking driven by capital expenditure. Enterprise chip demand (including HBM, SOCAMM, enterprise SSD, etc.) remains strong and diversified.

Price and export data confirm sustained upward cycle momentum

The strong fundamentals of the storage industry are strongly corroborated by spot and contract price movements.

According to DRAMeXchange, the spot price of 16Gb DDR5 reached a historical high of $47 in early July, more than three times the previous peak of about $10 in October 2017; the spot price of 16Gb DDR4 also remains near the cycle high of $75, an increase of about 2000% from the low of about $3 in October 2025.

For NAND, the contract price of 512Gb wafers is currently about $25, which is about 10 times higher than the low of $2.5 at the end of February 2025. While NAND spot prices moderated between April and June, they are still up more than 50% year-to-date.

South Korean export data also confirms this trend. In June, South Korea’s semiconductor exports reached $44.8 billion, more than three times the monthly average of about $14 billion in 2025, with year-on-year growth above triple digits for six consecutive months. TrendForce’s latest forecast shows that Q3 DRAM average price increase expectations have been greatly raised, and Q4 NAND price increase expectations have been revised from 8%-13% to 10%-15%. Bank of America Securities’ own forecasts show DRAM average prices will increase quarter-on-quarter by 53%, 17% and 7% respectively in Q2-Q4, while NAND will rise by 65%, 13% and 1% respectively.

Capital expenditure by large-scale cloud vendors continues expanding, solid demand side

On the demand side, Bank of America Securities expects Amazon, Microsoft, Alphabet and Meta—the four major U.S. hyperscale cloud vendors—to collectively increase capital expenditure by about 80% year-on-year in 2026, reaching about $700 billion, with the figure possibly approaching $1 trillion in 2027-2028. The combined revenue of these companies in 2026-2028 is expected to maintain annual growth of 15%-20%, cloud business revenue growth at 35%-40%, AWS operating profit margin above 35%, Azure above 40%.

Storage chip manufacturers generally believe that Meta will continue to increase its procurement of high-end storage products such as HBM, LPDDR5 and enterprise SSDs for AI data center construction. Some AI supply chain companies (such as NAND controller IC suppliers, substrate material manufacturers, etc.) also report Meta’s long-term chip and component orders are continuously strengthening. The previously rumored "Meta will lease surplus AI servers" is believed by chip manufacturers to lack basis.

Industry chain outlook on supply and demand is generally optimistic

Bank of America Securities analysts visited Japan this week and communicated with local investors and NAND supply chain companies, and the survey results were generally optimistic.

Company management generally provided positive performance guidance, mainly including: Q2 average prices (especially NAND) exceeded expectations; Q3 and Q4 average prices are expected to continue quarter-on-quarter increases; there are supply shortage risks for DRAM and NAND in 2027; long-term agreement (LTA) signing volume continues to expand (but is still quantity-driven); Japanese NAND manufacturers’ capital expenditure and production control remain restrained.

Overall, Japanese investors are bullish on the storage industry, but frequently ask about potential downside risks under the current strong growth backdrop, reflecting market concern about the sustainability of the cycle.

Samsung’s Q2 results may slightly miss expectations, storage business remains a highlight

Samsung Electronics’ preliminary operating profit for Q2 (expected to be announced July 7) may fall slightly short of consensus due to special bonuses (including some from Q1) and pressure on smartphone business profit margins.

However, Bank of America Securities points out that if only the storage business is considered, supported by better-than-expected average prices, the operating profit of the storage division is likely to exceed market expectations, which is confirmed by South Korea’s strong semiconductor export data.

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