Memory chip inventories have hit bottom. DRAM stands at 2 to 3 weeks and NAND at about 6 weeks, leaving both suppliers and customers short of stock. A supplier-favourable environment is expected to persist through the first quarter of 2026, and the investment stance after the second quarter is expected to be the cycle’s inflection point.

Suppliers have been maximising output since October last year, but conditions have not improved. Daishin Securities said limited headroom to utilise production capacity makes it structurally difficult to raise inventories quickly. More companies are trying to secure volumes than during the 2017 to 2018 supercycle, but supply and demand are so tight that only large customers with strong purchasing power can secure appropriate volumes.

The problem is that customers’ inventories are also at the bottom. Server customers are struggling to secure supply even if they try to build inventories in advance in preparation for expanded investment in general servers, because supply itself is insufficient.

Conditions are more serious for set makers. Daishin Securities analysed that some set makers hold inventories below normal levels and have begun to worry about the possibility of disruptions to product output.

Suppliers are actively using these supply-demand conditions and are instead pursuing aggressive price hikes. Prices surged each month in the fourth quarter of 2025. Daishin Securities estimated that some clients in December 2025 accepted requests for fixed-price increases of up to 70 percent from the previous quarter. It analysed that Samsung Electronics’ average selling price for commodity DRAM in the fourth quarter rose 43 percent from the previous quarter.

This supplier-favourable environment is expected to continue through the first quarter this year. Based on customer purchase orders, DRAM demand in 2026 is expected to grow more than 30 percent from a year earlier and NAND demand is expected to grow 20 percent. Based on capital expenditure, 2026 production growth for DRAM and NAND is limited to 20 percent and 17 percent, respectively. Daishin Securities analysed that the 2026 production capacity of the three DRAM makers is already sold out.

Supplier-favourable conditions persist... Investment stance to determine supply-demand in second half

The key is after the second quarter. With the supply-demand environment for commodity DRAM not favourable due to the capacity-encroachment effect of high bandwidth memory, conditions can change only if suppliers raise capital spending.

Daishin Securities pointed out that an excessive increase could instead trigger a sharp rise in production in 2027. In 2027, two new plants will start operations: Micron Technology's Idaho Plant 1 and SK Hynix's Yongin Phase 1.

For Samsung Electronics, capacity setup for P4L (Pyeongtaek Plant 4) P2 to P3 is scheduled to be completed within 2026, but when the investment is fully reflected from 2027, the risk of oversupply could increase. Daishin Securities analysed that oversupply has occurred when capital intensity, measured as capital expenditure as a share of revenue, recorded the low-to-mid 30 percent range or higher for two years.

Suppliers are also aware of this. SK Hynix has room for additional investment in M15x, but plans to execute only investment for monthly 40K, about half of the level, in 2026. Samsung Electronics' stance is to bring forward infrastructure investment but decide equipment investment while watching market conditions.

Daishin Securities forecast that if a restrained capital spending stance is maintained, a peak signal of multi-booking cancellations will be difficult to appear for some time. It analysed that if capital spending is sharply raised in the opposite direction on expectations of strong demand, the supply-demand environment could deteriorate sharply after the second half of 2027.