First issue: Samsung’s 1bnm problem
A few days ago, DRAMeXchange, a subsidiary of TrendForce, released a report stating that there are technical issues with Samsung’s 1bnm.
The summary of the report is as follows:
[DRAMeXchange August Server DRAM Contract Price Announcement]
Negotiations over server DRAM contract prices remained firm throughout August. For DDR4, CSPs including MS are actively proposing additional orders, and lead times have been extended through 2027. Most of the demand stems from SK hynix raising the production plan at its Wuxi fab. As a result, supply to PC OEMs, module houses, and consumer products has been reduced. DDR4 prices in August rose 0–5%, which is in line with the expected QoQ increase of 28–33%.
For DDR5, MS/AWS have presented additional orders for 2H25, continuing the demand momentum seen last month from Google and Oracle. On the supply side, technical issues on Samsung Electronics’ 1bnm process products have restricted product availability, further worsening market conditions. DDR5 prices in August rose 0–5%, in line with expectations for a 3–8% QoQ increase. The premium on 6400 MT/s high-bandwidth modules is gradually narrowing as Intel’s Granite Rapids platform moves into mass production (previously about a 5% premium).
Considering the economics of Ice Lake CPUs, CSPs wish to extend purchases and are actively negotiating with Intel. This has generated aggressive incremental demand for DDR4, eSSD, and HDD. As of August, SK hynix is negotiating long-term orders with major CSPs in the U.S. and China, with final shipment timing extended into 2H26–2H27. Micron is also in talks with major U.S.-based CSPs. In contrast, Samsung Electronics has not delayed the final shipment schedule to date, nor has it increased supply.
Total server DDR4 production in 2026 is expected to be 7 billion Gb, accounting for about 5% of total server DRAM. The supply shares of SKH, MU, and SEC are estimated at 60%, 25–30%, and 5–10%, respectively. SKH’s aggressive supply expansion stems from clean-room expansion, maintaining the 1znm process line at the Wuxi fab, long-term partnership with MS, and strengthened position in the Chinese market. SEC continues to raise the share of supply based on advanced nodes, and flexibility in DDR4 supply is expected to be a key market variable going forward. With orders continually increasing, DDR4 ASP in 4Q25 could rise an additional 15–20%. ASPs are expected to gradually ease beginning in 1Q26, after the final purchase window.
It is becoming clear that 2026 Capex for U.S.-based CSPs will increase YoY. As completion of new data centers approaches, server DRAM purchasing is being pulled forward into 2H25. Accordingly, total server shipments in 2026 could be revised up by 2.3%. For DDR5, suppliers’ inventories continue to decline to meet incremental demand in 3Q. However, due to technical problems, order visibility is expected to extend into 4Q25, and the aforementioned demand is expected to be fulfillable from 4Q. As a result, DRAM bit demand in 4Q will likely remain at 3Q levels. Therefore, contract prices are expected to continue rising through year-end, with a high likelihood of turning downward from 1Q26.
(Source: DRAMeXchange)
What stands out here is that technical issues have occurred on Samsung’s 1bnm process products.
When I asked Samsung about this report, the answer was that it is not true.
However, after directly checking with my sources, I was able to learn the following facts.
On July 24, TM Roh, head of Samsung’s MX Division, met with Micron CEO Sanjay Mehrotra.
A source familiar with the matter said that the performance and yield of LPDDR5X mass-produced on Samsung’s 1bnm fall short of Micron’s, and that the meeting was for Samsung’s MX Division to increase the volume of LPDDR5X sourced from Micron for next year’s S26.
Another source stated that there are internal concerns within Samsung about the competitiveness of 1bnm.
To quote directly: “We have to ride out next year on 1bnm, but we’re not confident.”
Samsung’s 1bnm technical issues—this is the first issue I believe will determine next year’s memory market.
The existing bullish thesis for next year’s memory market was this.
HBM will, of course, face supply shortages and see ASP increases,
and the reason many industry analysts, myself included, expected Samsung to benefit to some extent even if it lagged rivals in HBM was the logic that more wafers going into HBM would tighten supply of commodity DRAM as well, thereby benefiting Samsung, which has the largest commodity capacity.
However, if issues with Samsung’s 1bnm prevent it from sufficiently supplying LPDDR5X and DDR5, the story changes.
This would create additional revenue for SK hynix and Micron that hadn’t been assumed, while for Samsung it could lead to falling short of the benchmarks the market is currently using.
Second issue: The HBM commoditization debate
I think HBM is bound to become commoditized in the long run. However, I think it’s too early to worry about that now.
First, this entire HBM commoditization debate starts with NVIDIA.
NVIDIA will use its own logic base die for HBM4E / Rubin Ultra.
This base die will be fabricated on TSMC’s N3 node.
Originally, HBM vendors could differentiate performance versus competitors via the logic base die; if NVIDIA supplies this directly, it can accelerate a certain degree of commoditization of HBM. In other words, NVIDIA would make the core of HBM itself, and memory makers would be left making only the HBM “shell.”
I believe the reason memory makers’ stocks are currently undervalued is precisely this commoditization of HBM.
Normally, most stocks discount some portion of future earnings, but this is particularly pronounced for memory makers. Because they are viewed as traditional cyclical stocks, the cycle gets excessively reflected in their share prices.
However, I look at it a bit differently.
By my estimates, NVIDIA will introduce custom HBM in 2027, AMD in 2028, and Google or AWS in 2028–2029.
This means that even including NVIDIA, adoption wouldn’t come until the second half of 2027, and I think it is far too early to be pricing in a 2H27 issue already.
Also, not every ASIC maker can design custom HBM on its own.
Companies building relatively smaller-scale ASICs could co-develop exclusive HBM4E with a memory maker that has design capabilities—like Samsung—and adopt it one-stop.
Alternatively, Micron and SK hynix could collaborate with design houses to build and supply custom HBM.
That said, I do favor Samsung—a maker that owns its own foundry and has the design capability to provide the HBM4E base die from design through production in a one-stop manner.
In any case, I think it’s too early to judge the custom HBM4E issue now. If anything, while they may sell to players like NVIDIA as a commodity, they could also custom-tailor HBM4E for other companies at higher prices, thereby preserving ASPs and profitability.
Third issue: Revocation of VEU status for Samsung and SK hynix
Before getting into the details, I am extremely disappointed in the U.S. government.
Even with the sanctions, the NAND flash fab that SK hynix acquired from Intel should have been granted an exemption.
Sanctioning even the NAND flash fab that SK hynix acquired from Intel strikes me as a policy that is profoundly out of line with basic decency.
Getting to the main point, this is, rather, positive news in the long run for Chinese memory makers and Chinese semiconductor equipment makers.
This measure will instead accelerate the aging of Samsung and SK hynix’s fabs in China, bring forward depreciation, cause short-term supply-chain disruption, and, in the long run, make it easier for Samsung and SK hynix to withdraw from China.
When SJ decided to close Micron’s China fab, a large number of engineers who had worked there moved to local Chinese DRAM makers such as CXMT. As a result, CXMT—which had been subsisting on Qimonda’s rather mediocre technology—went on to make remarkable progress after Micron’s engineers joined.
Samsung and SK hynix will be no different. If things continue on this path, I think Samsung and SK hynix will wind down their China fabs around 2030–2032. This would be an enormous boon for YMTC and CXMT, because they would be able to acquire the advanced IP and skilled personnel they have long coveted with relative ease.
Another scenario is that Samsung’s and SK hynix’s fabs could be operated using Chinese-made equipment.
Chinese equipment is already used in the cleaning domain at some of SK hynix’s China fabs. By making it harder to introduce U.S.-made tools, the U.S. government’s revocation of VEU status could instead prompt Samsung and SK hynix to turn to Chinese equipment.
That would mean Samsung and SK hynix’s China fabs would effectively serve as validation sites for Chinese equipment, potentially opening export channels for those Chinese tools—an extremely serious development.
I want to criticize the U.S. government’s revocation of VEU status as a profoundly short-sighted decision.
The revocation of VEU status can actually be seen as a positive for Micron.
Micron operates no fabs in China, so it bears none of the risks associated with this VEU revocation. Moreover, if Samsung and SK hynix’s fabs are not upgraded, that will create shortages in advanced DRAM.
Even so, it’s hard to say that Samsung and SK hynix will suffer massive losses from this alone.
Recently, DDR4 prices have surged, and SK hynix has decided to ramp additional DDR4 production at its China fabs—through 2027.
Samsung, likewise, can import equipment without limit until January of next year, so it will try to bring in as much equipment as possible to upgrade its fabs.
This is one of the reasons I expect semiconductor equipment makers to post strong results next quarter.
Before the U.S. government’s sanctions take effect, it’s a foregone conclusion that Samsung and SK hynix will place large equipment orders. Additional revenue can be expected from pull-in demand.