Samsung, SK Hynix invest $1.3 trillion to boost AI memory capacity: Memory cycle tight in the short term, long-term capacity game looms

On June 29th, at a semiconductor industry meeting led by the South Korean President, Samsung Electronics and SK Hynix unveiled an epic ten-year investment plan. The two companies will invest a combined 2000 trillion won (equivalent to 1.3 trillion USD), all betting on the AI storage track, with a key focus on conquering the high-end HBM memory market. After the news broke, the stock prices of South Korea's two major storage leaders fell instead of rising, completely revealing the market's divergence between bulls and bears, officially marking the start of a new round of cyclical competition in the storage industry.

I. Investment Core: Fully Focused on the High-End HBM Storage Track

The focus of this trillion-dollar investment is highly concentrated on HBM (High Bandwidth Memory), the core product of the AI era.
Samsung will build multiple new 12-inch wafer fabs, increase investment in the Pyeongtaek production base, and fully expand the production line for the new generation HBM4; SK Hynix plans to double its DRAM wafer capacity within five years, directing 60% of its advanced capacity towards HBM3E and HBM4 products, while also establishing the world's largest HBM advanced packaging base.
Against the backdrop of the AI computing power explosion, HBM is an essential supporting component for GPU operation. The current surge in AI chip orders from NVIDIA and AMD has directly led to HBM orders exceeding supply, with product prices continuing to skyrocket. This is the core underlying logic for the massive capacity expansion by South Korea's two storage giants. The South Korean government is also using policy support to consolidate its monopoly position in the global DRAM and HBM industry, safeguarding its core semiconductor foundation.

II. The Underlying Logic of the Stock Price Pullback: Market Concerns Over Long-Term Overcapacity

After the announcement, Samsung and SK Hynix's stock prices experienced a slight pullback. The bears' concerns are very clear: the trillion-dollar capacity plan will unleash a massive supply in the coming years. By 2027, when the new capacity is fully operational, HBM will shift from its current tight, supply-constrained state to one of overcapacity, compressing product premiums and squeezing gross margins.
Historically, the storage industry has exhibited strong cyclicality. In the past, whenever Samsung and SK Hynix massively expanded DRAM and NAND‑Flash capacity, after the capacity came online, it triggered industry price wars, leading to sharp declines in memory chip prices and significant shrinkage in corporate profits. Market investors worry that this large-scale expansion will replicate the old cycle. By 2027‑2028, when the new capacity is concentrated and operational, HBM supply will exceed demand, breaking the current high-margin structure, and industry prosperity will rapidly decline.

III. Institutional Optimistic Logic: Supply-Demand Gap Remains Solid in the Next Two Years, Short-Term Supercycle Unchanged

The core argument for institutions' bullish view on the storage sector lies in the time lag in capacity deployment.
The construction cycle for the new wafer fabs and packaging bases planned this time is long, and the new capacity will only be gradually mass-produced and released after 2027. Within the next two years (2025‑2026), the incremental supply of new HBM is limited, while the global construction of AI large models and AI servers continues to accelerate, and procurement demand for HBM from NVIDIA and cloud providers continues to climb.
In the next two years, HBM will still maintain a structurally tight pattern, chip prices can remain high, and Samsung and SK Hynix's revenue and gross margins will continue to rise. The storage supercycle uptrend will continue. At the same time, this round of expansion is concentrated only on high-end HBM products; ordinary DRAM and flash memory have not been blindly expanded. The supply-demand balance for traditional memory chips remains stable, and traditional storage will also follow the industry cycle to achieve price increases and recovery, opening up overall industry profit margins.

IV. Long-Term Industry Competition: Domestic Storage Faces Opportunities and Challenges

The massive future HBM capacity lock-in by the two South Korean giants also brings dual impacts to the domestic storage industry.
From a challenge perspective, Samsung and SK Hynix's early lock-in of the next-generation HBM4 technology route has consolidated their technological barriers in high-end AI storage. For Yangtze Memory and ChangXin Memory, entering the high-end HBM track becomes even more difficult.
From an opportunity perspective, after the South Korean capacity is released in 2027, competition in the HBM industry will intensify, procurement costs for downstream AI server manufacturers will decrease, and cost pressure on the domestic AI industry will ease. Meanwhile, in the mid-to-low-end DRAM and NAND flash markets, domestic storage can continue to seize market share, avoiding direct competition with South Korean companies, thereby accelerating import substitution.

V. Summary

Samsung and SK Hynix's 1.3 trillion USD ten-year investment plan divides the storage industry into two phases.
In the short term (2‑3 years), constrained by factory construction cycles, the HBM supply-demand gap is difficult to fill. The prosperous uptrend cycle for AI storage will continue, and storage company profits will remain high. After 2027, as new capacities gradually come online, the industry will enter a new phase of capacity competition. HBM premiums will gradually decline, and the industry cycle will shift from an uptrend to a stable or even declining phase.
Overall, for investing in the storage sector going forward, the short term can rely on the supply-demand gap to capture market trends. In the long term, it is necessary to continuously track the pace of HBM capacity release, the actual incremental demand for AI computing power, and simultaneously monitor the progress of technological breakthroughs in domestic storage to judge subsequent industry inflection points.$XL2CSOPHYNIX(07709.HK) @Event Master