Storage chip "severe shortage," DRAM and DDR price hikes "unstoppable," UBS raises target prices for Samsung and SK Hynix

Storage chip "severe shortage," DRAM and DDR price hikes "unstoppable," UBS raises target prices for Samsung and SK Hynix

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The storage chip industry is entering a period of "serious shortage," with strong demand and limited capacity expansion jointly pushing up DRAM prices into a robust upward cycle. Against this backdrop, UBS has significantly raised its expectations for DRAM contract prices and increased the target stock prices of industry giants Samsung Electronics and SK Hynix, believing the price surge will last at least until the end of 2026.

According to Zuifeng Trading Desk, UBS noted in its research report released on November 3 that its latest industry survey shows contract price negotiations for DDR memory in the fourth quarter of 2025 are proceeding with positive momentum, with quarter-on-quarter price increases expected to reach 21% or higher. The report explicitly states, "DRAM suppliers clearly have the upper hand."

Based on the strong pricing outlook, UBS raised SK Hynix's 12-month target price from 640,000 KRW to 710,000 KRW and maintained its "Buy" rating, calling it its "top pick" in the memory space. At the same time, Samsung Electronics' target price was also raised from 118,000 KRW to 128,000 KRW. UBS thus raised its revenue and earnings forecasts for both companies for 2026 and 2027.

The surge in prices this round is driven by a surge in high-bandwidth memory (HBM) demand powered by artificial intelligence (AI), combined with a steady upgrade cycle for traditional servers. Because manufacturers are prioritizing limited wafer capacity for higher-margin HBM production, the supply of traditional DDR memory has been squeezed, exacerbating the supply-demand imbalance. UBS predicts that the DRAM upcycle will last at least until the first quarter of 2027.

Suppliers Hold Pricing Power, DDR Price Increase Will Continue

The UBS report details the current strong position of suppliers in the market. According to its latest industry survey, contract price negotiations for DRAM in Q4 2025 continue to show positive momentum, with significant price increases across major categories.

The report cites market research firm Trendforce data, stating that the contract price trends for PC DDR4 and DDR5 in October suggest that if prices remain stable for the rest of the quarter, the average quarter-on-quarter increase for the quarter will reach 25% and 26% respectively.

At the same time, UBS's research shows that contract negotiations for server DDR5 are moving toward a 20% or higher quarter-on-quarter increase. For mobile device DRAM, some supplier quotations are seeking increases close to 40%, though UBS expects the final transaction price increases may be about 25%.

Based on the updated supply-demand model, UBS has raised its expectations for blended DDR contract prices, now predicting a 21% quarter-on-quarter increase in Q4 2025 (previously 17%). It also forecasts the positive price momentum will extend from the previously expected end of Q3 2026 to the end of Q4 2026.

AI Demand Squeezing Traditional Memory Capacity

The core factor behind this round of storage chip price spikes is structural supply-demand imbalance, with AI as the key variable. UBS analysis believes the memory industry faces a "potential severe shortage," driven mainly by four factors:

1. Strong HBM demand triggered by AI.

2. Robust upgrade cycle for traditional servers.

3. Additional demand for enterprise-grade SSDs due to AI and the shortage of traditional HDDs.

4. Limited incremental wafer capacity prioritized for HBM production.

The report points out that the tilt of capacity toward HBM has directly led to tight supply for traditional DDR memory. UBS estimates that by the end of 2025, front-end DRAM capacity used for HBM production will account for 20% of the industry total, rising further to 25% by the end of 2026.

As a result of this structural shift, UBS predicts that DDR memory shortages will last at least through Q4 2026, and NAND flash shortages will continue through Q3 2026.

UBS Raises Outlook for Two Industry Giants

Facing an industry-wide price uptrend, UBS is optimistic about Korea’s two leading memory chip manufacturers and has accordingly raised their financial forecasts and valuations.

For SK Hynix, UBS raised its 2026 revenue and operating profit forecasts by 3% and 5%, respectively; its 2027 forecasts were raised by 9% and 16%, respectively. UBS reiterated in the report that SK Hynix is its “top pick in the memory space,” emphasizing Hynix’s leading position in the HBM market and forecasting that it will maintain a 51% market share in 2026.

For Samsung Electronics, UBS likewise raised its 2026 revenue and operating profit forecasts by 2% and 7%, respectively, based on higher DDR pricing expectations; the 2027 forecasts were raised by 5% and 23%, respectively. UBS’s updated operating profit forecasts are 24% and 15% higher than the Visible Alpha consensus for 2026 and 2027, respectively, reflecting its confidence in Samsung’s profitability.

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The above content is from Zuifeng Trading Desk.

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