CITIC Securities has released a research report stating that compared to the previous storage cycle upturn (Q3 2023 - Q2 2024) which was characterized by "strong expectations but weak reality," the current storage cycle upturn represents "conservative expectations → North American CSP CAPEX increases + HDD demand spillover." Combined with NAND maintaining relatively low capacity utilization levels over approximately three quarters and cautious overseas manufacturer CAPEX expectations, CITIC Securities believes storage market prosperity will continue at least through 2H26. The firm recommends focusing on enterprise SSD demand momentum and suggests attention to storage module companies with rapid enterprise product development and strong price increase benefit logic.
**Storage Cycle Review: Previous Round Was "Strong Expectations, Weak Reality," Current Round Is "Supply Optimization + AI Demand Pull"**
The previous storage cycle upturn began in June 2023. Following manufacturer production cuts (according to TrendForce, average capacity utilization of the top 5 manufacturers in 2H23 was only 70%+), gradually strengthening quotations, and downstream customer consumer product inventory gradually returning to normal levels, DRAM and NAND Flash supply-demand accelerated toward balance, with prices beginning to stabilize and recover. According to Bloomberg, DRAM prices accumulated gains of 20%-70% from their trough through Q2 2024, while NAND Flash accumulated gains of 80%-200%, lasting approximately 3-4 quarters.
The current cycle upturn began in Q1 25. On the supply side: 1) DRAM: Overseas manufacturers focused on high-margin DDR5 and HBM, compressing DDR3/DDR4 supply, causing DDR3/DDR4 to begin stabilizing in February 2025. Q2 DDR4 price increases accelerated rapidly, with Bloomberg showing DDR4 chip Q2 gains essentially doubling; 2) NAND Flash: Overseas manufacturers have successively announced 10%-15% production cuts since December 2024, while accelerating capacity migration to 200+ layer products, thereby reducing supply of lower-tier products. TLC chip prices stabilized in March 2025, accelerating supply-demand balance in Q1 25, with moderate 3%-8% increases in Q2 25.
Entering September, multiple overseas storage manufacturers including SanDisk, Micron, and Samsung have announced plans to raise mainstream storage DRAM and NAND quotations. The firm continues to be optimistic about the demand cycle driven by "North American CSP CAPEX increases + HDD demand spillover."
**Demand Side: High AI CAPEX Growth and HDD Shortages Are Core Drivers of Enterprise SSD Price Increases**
1) High AI CAPEX growth driving data center storage demand. The four major overseas CSP companies have revised up their 2025 CAPEX guidance. The firm estimates 2025/26 AI CAPEX will grow +81%/64% year-over-year, with global AI server market scale reaching $275.1/$413.9 billion, up +64%/+50% year-over-year, driving high growth in data center storage demand.
2) HDD supply shortages causing overseas CSPs to shift toward eSSD. Nearline HDDs, the optimal solution for storing cold data, are experiencing significant supply shortages due to capacity constraints (Western Digital and Seagate have no short-term expansion plans), with delivery times extending to 52 weeks. This is causing overseas CSP companies to consider using eSSD for cold data storage.
Considering factors including AI server shipment growth, increased SSD capacity per AI server, and HDD shortages, the firm estimates enterprise SSD will reach 339.2 billion GB by 2026, up +35% year-over-year, with AI server enterprise SSD demand reaching 218 billion GB, up +55% year-over-year. AI server enterprise share of global NAND demand is expected to rise to 20%.
**Supply Side: Current NAND Manufacturer Capacity Utilization Around 80%+, Cautious NAND CAPEX Planning May Create Supply Gap**
From a capacity utilization perspective, when the industry was at the previous cycle's bottom in H1 2023, according to TrendForce, overseas storage manufacturer utilization rates fell to approximately 70%-80% in 2H23 (with NAND utilization even lower). In 2H24, the NAND Flash industry again experienced oversupply, with overseas majors announcing 10%-15% production cuts since December 2024 and accelerating capacity migration to 200+ layer products, thereby reducing product supply.
From a CAPEX perspective, according to TrendForce and overseas storage manufacturer earnings calls, 2025 CAPEX from the three major DRAM manufacturers is significantly tilted toward DRAM advanced process 1γ and HBM, with relatively cautious NAND Flash CAPEX. Two NAND Flash manufacturers, SanDisk and Kioxia, have increased CAPEX year-over-year. Overall, according to TrendForce, 2025 global DRAM CAPEX growth reached 54%, while NAND Flash was only 6%.
Considering: 1) High growth in AI data center storage demand; 2) Potential partial HDD to eSSD conversion beginning in 2026; 3) eSSD having the highest NAND Flash wafer requirements, with current spare capacity unable to fully meet eSSD demand in the short-to-medium term; 4) Slow NAND CAPEX growth in 2024-25 with no significant new capacity additions, the firm believes these multiple factors may create a supply gap for NAND in 2026, supporting manufacturers' push for NAND Flash price increases.
**Conclusion: Structural Cyclical Prosperity Has Sustainability, Optimistic on Enterprise Product Performance**
According to SanDisk and industry sources, manufacturers have successively raised quotations since September, with wafer and module prices already experiencing modest increases. On September 4, major NAND manufacturer SanDisk issued a price increase notice, raising flash memory product prices by 10%+ for channel and consumer customers, primarily due to high demand for North American enterprise eSSD and industry supply migration to next-generation nodes and high-end products, causing tight supply and price increases for low-end products.
On September 18, following Micron's price suspension, Samsung also notified major customers of Q4 price increases, with Samsung expecting NAND-type eMMC/UFS protocol price increases of 5%-10%. Since September, according to Bloomberg and CFM flash market data, NAND Flash wafers and some storage modules have experienced varying degrees of single-digit percentage increases.
Looking ahead, TrendForce expects Q4 25 NAND Flash prices to rise 5%-10%. The firm believes subsequent data center eSSD price increases may exceed market expectations, with large-capacity QLC SSDs potentially experiencing explosive growth in 2026. The firm takes an optimistic view of this structural cyclical prosperity's sustainability.
**Risk Factors:** Global macroeconomic recovery falling short of expectations; macroeconomic volatility causing European and American enterprise IT spending (especially AI spending) to fall short of expectations; AI server demand falling short of expectations; NAND technology upgrades falling short of expectations; NAND cost reductions falling short of expectations; overseas major company operational strategies and capacity adjustments falling short of expectations; enterprise SSD demand falling short of expectations; continued intensification of industry competition.
**Investment Strategy:** The firm believes NAND price increases may exceed expectations under high enterprise SSD demand growth, with core recommendations for companies with rapid enterprise storage development and strong price increase benefit logic. Enterprise SSD/memory supporting chip design companies are expected to benefit indirectly.