According to Zhitong Finance APP, Kaiyuan Securities released a research report stating that the effects of NAND Flash manufacturers gradually reducing production will begin to show in the fourth quarter of 2024. Consumer electronics brands are adjusting their production in response to international market changes, driving demand. It is expected that NAND Flash prices will stabilize and stop falling in the second quarter of 2025. With the massive growth of data volume, the proportion of storage devices in the BOM for data center procurement continues to rise, with storage chips accounting for about 40% of data center procurement, and this is expected to increase to 50% in the future. At the same time, the growth of computing power in the AI era also imposes three major requirements on storage: high speed, high capacity, and high integration.

The main points of Kaiyuan Securities are as follows:

Price Cycle: Overseas Giants Reduce Production, Prices Stabilize and Rise

As a leading manufacturer in the storage industry, Micron's development is closely related to the storage industry cycle. By analyzing Micron's stock price trends, the past four storage cycles have been reviewed.

(1) Supply Side: Giants reduce production, tightening capacity; (2) Demand Side: Terminal inventory destocking is nearing completion, and AI demand is driving price recovery.

Currently, the storage price cycle is gradually warming up: (1) NAND Aspect: The effects of NAND Flash manufacturers gradually reducing production will begin to show in the fourth quarter of 2024. Consumer electronics brands are adjusting their production in response to international market changes, driving demand. It is expected that NAND Flash prices will stabilize and stop falling in the second quarter of 2025; (2) DRAM Aspect: With expectations of DDR4 production cuts or halts being released domestically and internationally, a price increase wave for DDR4 has begun on the trade side. Micron's DDR4 quotes surged by 50% in June, with both 8Gb and 16Gb spot prices performing strongly.

AI Era: AIDC Large Cycle Initiated, Domestic Storage Module Manufacturers Enter Golden Development Period

(1) Domestic and foreign cloud service providers engage in an AI arms race, significantly increasing capital expenditure

Overseas: The four major cloud service providers (CSP) in North America—Amazon, Google, Microsoft, and Meta—have capital expenditure plans for 2025 that far exceed market expectations, with a total scale exceeding $315 billion, a year-on-year increase of over 30%; Domestic: Although total capital expenditure by cloud vendors and operators has contracted, the proportion of computing power investment has significantly increased. Alibaba plans to invest 380 billion yuan in cloud computing and AI infrastructure over the next three years; ByteDance's capital expenditure for 2025 is 160 billion yuan, of which 90 billion yuan is for AI computing power procurement and 70 billion yuan is for IDC infrastructure.

(2) Storage modules, as one of the most important hardware in data centers, are expected to see high demand growth

With the massive growth of data volume, the proportion of storage devices in the BOM for data center procurement continues to rise, with storage chips accounting for about 40% of data center procurement, and this is expected to increase to 50% in the future. At the same time, the growth of computing power in the AI era also imposes three major requirements on storage: high speed, high capacity, and high integration.

(3) Policy Intensification, Mainland Module Manufacturers Ride the Wave of Localization According to TrendForce data, in 2023, the global market share of DRAM memory modules and SSD modules is mainly occupied by overseas leading module manufacturers. As one of the largest consumer markets for storage chips in the world, China's domestic supply capacity remains weak, and there is an urgent need for self-controllable demand in core areas. In recent years, to accelerate the development of China's integrated circuit industry, the government has introduced a series of policies to strongly support the development of the semiconductor industry.

Benefiting Targets

Jiangbolong (301308.SZ), Demingli (001309.SZ), Baiwei Storage (688525.SH), Shannon Semiconductor (300475.SZ), Netac Technology (300042.SZ), etc.

Risk Warning

AI industry development may fall short of expectations; cloud vendors' capital expenditures may be lower than expected; risks of storage price fluctuations; risks from changes in the international situation