DRAM/NAND/HBM upcycle extended, storage chip valuation multiples likely to expand further

Overview

Goldman Sachs believes the current semiconductor industry upcycle is different from historical cycles, driven by significant growth in server memory demand on one hand, and slower capacity growth on the other, resulting in an extended cycle until 2028, with potential for valuation multiples to rise from current low levels to higher ones.

Core views

Demand side: Server memory share rises from 16% in 2017 to 61% in 2028, AI servers driving memory demand growth, CAGR of DRAM/NAND expected at 28%/23% from 2026-2028. Supply side: HBM occupying large wafer capacity, CAGR of DRAM capacity expected at 7-8% (lower than 12% for 2017-2018 by 4-5 percentage points), HBM capacity share continuously rising. Contract dynamics: LTAs provide more binding contract terms including prepayments and penalty clauses, reducing price volatility, enhancing demand visibility, and promoting sustainable profitability for manufacturers.

Analysis framework

The institution uses a supply-demand framework to compare differences between historical and current cycles: 1) Demand-side analysis of AI server penetration and demand growth rates; 2) Supply-side analysis of slowing capacity growth and HBM squeezing traditional memory capacity; 3) Contract dynamics analysis of increased LTA binding. Through three dimensions, it validates the sustainability of the current cycle being longer, indicating that improved memory manufacturer profitability will drive valuation expansion.

Methodology notes

• Industry/sector Analysis FrameworkSupply-demand framework

  Storage chip industry supply-demand framework

  The supply-demand framework compares supply-demand gaps (S/D) and price trends to determine cycle lengths, showing that the current DRAM/NAND/HBM supply-demand gap persists until 2028, indicating a longer cycle than 2017-2018.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics (005930.KS)

  Increased DRAM/NAND/HBM demand drives profitability, significant progress in HBM business

  Strengths

  High DRAM/NAND demand share, accelerated HBM business growth

  Weaknesses

  -

  Comparison

  -

  Risks

  Declining smartphone profits, loss of OLED market share

• SK Hynix (000660.KS)

  Leading HBM market share, valuation method switched to P/E

  Strengths

  Advanced HBM technology, valuation method adjusted to P/E

  Weaknesses

  -

  Comparison

  -

  Risks

  Worsening memory supply-demand, reduced AI capital expenditure

• Kioxia Holdings (285A.T)

  Extended NAND cycle, increased demand drives valuation

  Strengths

  Continuous上涨 in NAND prices, growing HBM demand

  Weaknesses

  -

  Comparison

  -

  Risks

  -

Key data

• DRAM 2027E supply-demand gap5.9%2026E was 5.0%
• NAND 2027E supply-demand gap4.6%2026E was 4.4%
• HBM 2027E supply-demand gap6.0%2026E was 5.4%
• Samsung DRAM 2026E ASP326%year-over-year increase
• Samsung NAND 2026E ASP283%year-over-year increase

Impact & implications

Memory manufacturers' profitability continues to improve, with DRAM/NAND gross margins expected to remain at 80%/mid-high levels. Current valuation multiples (Samsung 7X, SK Hynix 3.4X) are significantly lower than historical average multiples (9X-10X), suggesting potential for valuations to reach 10X-20X levels if the cycle persists until 2028, offering substantial valuation expansion space.

Risks

• Worsening memory supply-demand leading to price declines
• Declining smartphone demand impacting traditional memory
• Samsung's HBM business impact on SK Hynix's HBM revenue
• Reduced AI-related capital expenditure affecting HBM demand