Prices for server DRAM from Samsung Electronics and SK hynix are rising even more steeply in the second quarter after increases in the first quarter this year. Because of the tilt toward high bandwidth memory (HBM), the shortage of general-purpose server DRAM has led to the unusual situation in which its operating margin exceeds that of HBM, the cutting-edge product.
Big tech corporations such as Amazon Web Services (AWS), which operate general servers including in the cloud, are said to be accepting worsening expense and paying a premium to secure the memory they need right now to run servers. Leveraging this supplier-friendly environment, Samsung Electronics and SK hynix are discussing 3- to 5-year long-term supply agreements (LTA) with customers that guarantee memory supply volumes and prices.
According to the industry on the 25th, second-quarter contract prices for server DRAM from Samsung Electronics and SK hynix are surging more than 30% to 40% from the previous quarter. In particular, prices for server DRAM from Samsung Electronics and SK hynix—which have exerted stronger influence than U.S. Micron in the server DRAM market—are on an upward trajectory, it said. As a result, domestic and foreign investment banks and securities firms expect the two companies' server DRAM operating margins to exceed the existing 50% to 60% range and top out at as high as 80%.
The center of the AI memory market is currently HBM, and given that the estimated operating margin for the mainstay 5th-generation HBM (HBM3E) is in the 60% range, it shows how severe the shortage of server DRAM is. A person familiar with Samsung Electronics said, "If you were to pick the most expensive product in today's global semiconductor market, it would certainly be HBM, but the most profitable product is general-purpose DRAM," adding, "As the two companies noted on their fourth-quarter earnings conference calls last year, the scenario in which general-purpose DRAM profitability overtakes HBM has become reality."
The industry expects this distorted supply-demand structure in the general-purpose DRAM market to persist through next year. While the pace of price increases may ease over time, the shortage is set to continue. The biggest reason is that the pace of DRAM capacity expansion at Samsung Electronics and SK hynix is proceeding more slowly than market demand. By contrast, investment in AI data centers and demand for high-performance server DRAM continue to grow.
Market research firm TrendForce sees it as difficult for capital expenditures by the three major memory makers to yield meaningful capacity additions immediately, and believes that additional capacity from Samsung Electronics and Micron will be hard-pressed to materially contribute to the market before the second half of 2027. Typically, it takes about one to two years from capital investment to production for memory semiconductors. Earlier, Reuters reported that as memory makers concentrate DRAM on producing HBM for AI servers, supply of general-purpose DRAM is being squeezed.
There are also physical limits behind the slow expansions. SK Group Chairman Chey Tae-won previously noted that HBM production requires many wafers, and that even if one tries to increase wafer supply, it takes at least four to five years. New overseas plants likewise cannot be stood up immediately, as power and water, construction conditions, and securing engineers must come first, the explanation said. SK hynix has projected that a considerable portion of this year's DRAM wafers will be allocated to HBM, and Micron's second Idaho plant is not scheduled to start operations until 2027.