Currently, Micron holds a 25% share in the global DRAM/NAND Flash market and a 12% share in the automotive storage market, with a market share exceeding 40%.
It is noteworthy that previously, domestic storage leaders Yangtze Memory and ChangXin Memory have both been added to the United States' "Entity List." Last year, the U.S. export controls specifically mentioned storage chips, imposing restrictions on DRAM memory chips and NAND flash memory chips. The security review of Micron is expected to greatly benefit domestic storage chip companies.
With the recovery of downstream application fields, the demand driven by automobiles, telecommunications, and infrastructure, coupled with the increase in artificial intelligence computing power and the catalysis of intelligent applications by ChatGPT, the domestic replacement of storage chips is expected to usher in a new round of opportunities.
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Yole data predicts that the compound annual growth rate of the global storage chip industry market size from 2021 to 2027 will be 8%, and it is expected to exceed 260 billion U.S. dollars by 2027.
Overview of the Storage Chip Industry
Storage chips are core components of semiconductors and can be divided into RAM (Random Access Memory, including DRAM, SRAM, new types of RAM, etc.), ROM (Read-Only Memory), and Flash (including NAND Flash, NOR Flash, etc.) according to their nature.
Storage chips can be categorized into volatile and non-volatile storage chips based on whether data is lost after power is cut off.
Volatile storage chips commonly refer to DRAM, while non-volatile storage chips commonly refer to NAND flash memory chips and NOR flash memory chips.DRAM and NAND Flash are the mainstream products in the memory industry.
According to data from IC Insights, in 2021, DRAM accounted for approximately 56% of the entire memory market, with NAND Flash accounting for about 43%, where NAND Flash constituted 41% and NOR Flash 2%. Other memory chips (EEPROM, EPROM, ROM, SRAM) will grow slowly, but the likelihood of significantly capturing the market is small.
01 DRAM
DRAM, or Dynamic Random Access Memory, is characterized by its high capacity, low power consumption, and low cost, but it requires continuous charging. It is primarily used for memory in mobile terminals and servers.
From a technological perspective, the latest standard for DRAM has evolved to DDR5, with breakthroughs in processes below 10nm still pending. Omdia forecasts that the market share of DDR5 will increase to 43% by 2024.
In terms of market potential, with the accelerated development of emerging applications such as artificial intelligence, cloud computing, big data, AIoT, and the Internet of Things, the future market demand for DRAM memory is expected to maintain a growth trend.
Looking at the downstream supply areas, in 2023, the supply bit situation of major memory manufacturers for DRAM is expected to see servers surpass mobile DRAM business for the first time as the largest producer of supply bits, with servers accounting for 38% and mobile phones 37%.
In terms of competitive landscape, the mainstream DRAM market is dominated by the three industry leaders: Samsung Electronics, SK Hynix, and Micron Technology, forming high barriers in technology, brand, and market.
Representative companies from Mainland China include ChangXin Memory, Fujian Jinhua, Beijing Silicheng (fully acquired by Beijing Junzheng), and Unigroup Guoxin, among others. Taiwan-based manufacturers such as Nanya Technology, Huabang Electronics, and Powertech also stand out in this field.ChangXin Memory is primarily engaged in the design, research and development, production, and sales of Dynamic Random Access Memory (DRAM) chips. It has established a 12-inch wafer fab and has begun production. Currently, ChangXin's technology node is focused on the 19-17nm range, which is more than two generations behind the industry leaders.
In October 2022, the U.S. Department of Commerce's Bureau of Industry and Security prohibited the export of certain advanced process equipment, components, parts, and software technology that meet the following conditions: used for the production of logic chips with non-planar transistor structures (i.e., FinFET and GAAFET) for processes below 16/14nm, production of 128-layer or higher NAND, and production of DRAM with processes below 18nm.
The restriction on 18nm will impact ChangXin Memory's subsequent expansion plans for production below 18nm in Phase II.
Unigroup Guoxin's memory chip business is undertaken by its subsidiary, Xi'an Unigroup Guoxin Semiconductor Co., Ltd., which offers a range of memory chip products including DRAM KGD, DRAM chips, DRAM modules, and 2D SLC NAND Flash chips.
It is noteworthy that Samsung, Micron, SK Hynix, and Western Digital have all announced significant cuts in capital expenditures and even production reductions for 2023. Due to the reduction in capital spending and production cuts, the construction of new fabs or the expansion of new capacities by major global manufacturers has generally been delayed.
Samsung's P3L fab is expected to begin mass production of DRAM in 23Q1, and it is anticipated that Samsung may continue to expand capacity at P3L in the future. Micron has not made any new progress after acquiring new fab land in Taiwan, China. SK Hynix has 40-50% of its DRAM production in Wuxi, and it is less likely that this part of the production will introduce EUV to advance to more advanced processes. Nanya and Huabang have postponed their original plans for new fab construction.
02 NAND Flash
NAND Flash is suitable for the storage of large-capacity data (typically from 1Gb to 1Tb), mainly driven by the capacity and specification upgrades of smartphones, servers, and similar devices.
In terms of the NAND Flash competitive landscape, Samsung and Kioxia lead, along with Western Digital, Micron, SK Hynix, and Intel, forming a stable market structure with the six original manufacturers accounting for more than 95% of the market share.
The main representative enterprise from Mainland China is Yangtze Memory.The Yangtze Memory Technologies Co., Ltd. (YMTC) National Memory Base Project Phase I commenced construction at the end of 2016. The 32-layer and 64-layer memory chip products have achieved stable mass production. YMTC has also successfully developed the 128-layer flash memory chip, which is currently known to have the highest storage density per unit area, the highest I/O transfer speed, and the highest single NAND flash chip capacity in the industry. In 2021, the Phase I project of YMTC reached full production capacity. Currently, YMTC's production capacity at its Wuhan wafer fab is 100,000 wafers per month, and it plans to build a second wafer fab in Wuhan to expand production to 300,000 wafers per month. This will help to further increase market share and accelerate the domestic substitution of storage chips.
Looking forward to the NAND production capacity of major memory manufacturers in 2023, Samsung and YMTC will increase production, while Kioxia/WDC, SK Hynix, and Micron will reduce production. Meanwhile, the domestic NAND giant YMTC, facing U.S. sanctions, will also reduce production of NAND Flash products above 128 layers.
The main reason for Samsung's aggressive expansion is the high competition in the NAND chip market. Some competitors, such as the alliance between Kioxia and WDC, have a single product portfolio, focusing on NAND business and lacking a DRAM product portfolio to protect their operating profits. Therefore, their overall risk resistance is slightly inferior to other memory manufacturers that focus on both DRAM and NAND.
03 NOR Flash
NOR Flash is a type of non-volatile memory with basic storage units in parallel form, enabling on-chip execution. It is widely used in electronic devices that require storage of system program codes and is the largest market for memory chips, aside from DRAM and NAND Flash.
In terms of competitive landscape, according to CINNO Research, in recent years, U.S. manufacturers such as Cypress and Micron have gradually exited the NOR Flash market, with manufacturers from Mainland China and Taiwan gradually taking over the production capacity and occupying a dominant position.
The leading companies are Winbond, Macronix, GigaDevice, etc., with GigaDevice being the main representative enterprise from Mainland China.
Overall, as mentioned earlier, the core focus of the memory industry lies in DRAM, NAND Flash, and NOR Flash.Other companies in the industry, due to the different stages of development they are in, while aiming to catch up with leading companies in technology, also focus on the niche market of mature products by combining their own technical characteristics and market demands, and achieve a filling and substitution effect. This creates a differentiated competition with the leading companies in the industry, ushering in new opportunities for development.
Domestic storage chip layout manufacturers also include Dongxin Shares (pure niche storage, high proportion of SLC NAND), Puran Shares (niche NOR Flash), Langqi Technology (DDR5 interface chips), Juchen Shares, Wuhan Xinxin, and others.
In the future, storage chips will usher in a new growth period driven by downstream industries such as cloud computing, AIoT, and smart cars. Thanks to the rapid development of the domestic electronics industry and the technological breakthroughs of related companies, China's market position in the global storage chip field is expected to improve, and domestic related manufacturers have a large substitution space.
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