{"text":[[{"start":8.9,"text":"Investors are betting on a prolonged boom for memory chipmakers amid voracious AI demand that has prompted customers to lock in multiyear contracts with SK Hynix and Samsung Electronics."}],[{"start":21.200000000000003,"text":"Hynix, the world’s second-largest memory chipmaker and a key supplier to Nvidia, said the “structural shift” differs from past booms because customers are prioritising security of supplies over price amid an acute shortage. That shift is reinforcing expectations that an industry long defined by boom-and-bust cycles may be shaking off its volatile past."}],[{"start":43.1,"text":"Analysts say the memory sector is facing a supply crunch as chipmakers, which also include Micron Technology, struggle to meet demand driven by a global data centre build-out, making memory a key bottleneck in the AI supply chain. "}],[{"start":57.35,"text":"Many view the shortage as structural rather than temporary because demand has shifted from cyclical consumer electronics to deep-pocketed AI hyperscalers rapidly increasing capital spending."}],[{"start":68.35,"text":"Demand is also becoming more persistent as AI spreads into everyday applications, increasing the need for memory across devices and services."}],[{"start":77.19999999999999,"text":"Samsung’s co-chief executive Young Hyun Jun told shareholders in March that AI demand was driving an “unprecedented supercycle” in the semiconductor market and the company is planning a “substantial” increase in capital expenditure this year to meet surging memory demand."}],[{"start":93.79999999999998,"text":"SK Hynix and Samsung, which reports quarterly results on Thursday, say customers are now seeking contracts for three to five years rather than the usual quarterly agreements. This move shift enhances demand visibility and reduces the risk of oversupply, enabling producers to increase capital spending in a more controlled way."}],[{"start":115.49999999999999,"text":"“We are in a supercycle as AI requires more powerful memory for inference and agentic services,” said Kwon Seok-joon, a professor at Sungkyunkwan University. AI inference is the process whereby a trained AI model such as a chatbot generates responses. Agentic AI services are advanced systems that can handle complex problems and act on their own, with little human assistance."}],[{"start":138.29999999999998,"text":"“Hyperscalers are expanding capacity aggressively to avoid falling behind in the AI race, pushing up chip prices while production remains constrained.”"}],[{"start":147.14999999999998,"text":"Samsung’s Young Hyun Jun told shareholders in March that the company was talking to major customers about moving on to contracts of between three and five years. The company also plans to increase spending this year, earmarking a record Won110tn for chip capacity expansion and research."}],[{"start":167.59999999999997,"text":"Analysts say the supply crunch is unlikely to ease before 2028, given the time required to build new plants. SK Hynix said it would “significantly” increase capital spending this year, but technological challenges are expected to limit how quickly supply can expand."}],[{"start":184.09999999999997,"text":"“We are in the third year of the upcycle with no end in sight,” said Daniel Kim, an analyst at Macquarie. “Chipmaking has reached a level of complexity where supply cannot easily be increased. Shortages are likely to intensify next year.”"}],[{"start":198.49999999999997,"text":"As a result, the industry has become a seller’s market, with tight supply giving producers greater pricing power. Long-term contracts also allow companies to better manage output, unlike in the past when they were forced to react to volatile demand."}],[{"start":213.09999999999997,"text":"“The tables have turned,” said Kwon, noting that Samsung, SK Hynix and Micron jointly control about 90 per cent of the market for DRam, which serves as the main memory for computers and smartphones. “Producers now have the upper hand.”"}],[{"start":229.94999999999996,"text":"Analysts believe this oligopoly, formed after decades of consolidation, will allow memory makers to sustain elevated margins as long as investment in AI infrastructure continues. SK Hynix reported a quarterly operating margin of 72 per cent, while Samsung’s memory margin is estimated to be well above 60 per cent, compared with Nvidia’s 65 per cent and TSMC’s 58 per cent."}],[{"start":255.14999999999995,"text":"Nomura analyst CW Chung said memory chip prices could rise by up to half in the second quarter compared with the first three months of the year, potentially lifting margins to above 80 per cent. He added that the growing share of long-term contracts would reduce sharp price swings."}],[{"start":273.15,"text":"“Memory chips have become a core pillar of AI infrastructure,” Chung said, predicting that the upcycle could last three to five years."}],[{"start":281.2,"text":"Net profits at Samsung and SK Hynix this year are forecast at $151bn and $115bn respectively — far bigger than TSMC’s $81bn, according to Bloomberg. "}],[{"start":292.75,"text":"Yet both Korean companies are valued at less than six times projected earnings, compared with roughly 19 times for TSMC and 22 times for Nvidia. The gaps reflect the industry’s historical cyclicality, although analysts expect them to narrow as earnings stability improves."}],[{"start":309.55,"text":"SK Hynix shares have surged more than 600 per cent over the past year, while Samsung shares have gained nearly 300 per cent."}],[{"start":318.25,"text":"Risks for the sector remain, however. Rapid capacity expansion could eventually lead to oversupply, particularly if hyperscalers slow their investment in AI infrastructure. Growing competition from Chinese players such as CXMT and YMTC also raises concerns about excess long-term supply in lower-end products."}],[{"start":339.3,"text":"“This is certainly a supercycle. But that doesn’t mean there won’t be ups and downs,” said Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology. “The data centre business will have its own cycles, even if longer-term contracts smooth some volatility.”"}],[{"start":356.90000000000003,"text":"Kwon expects demand to remain strong, arguing that on-device AI could eventually surpass data centres as the main driver of memory consumption. But he warned that oversupply in legacy chips could emerge about 2035 as new plants come online and Chinese capacity expands."}],[{"start":377.05,"text":"Kwon estimates Samsung and SK Hynix could more than double their combined capacity by then: “There is strong optimism about the durability of this cycle — but it ultimately depends on how long the current pace of AI data centre expansion can be sustained.”"}],[{"start":392.95,"text":"Miller also warned that Chinese producers are using the current boom as an opportunity to strengthen their position, as tight supply pushes some western manufacturers to consider broader use of Chinese chips in consumer electronics."}],[{"start":407.3,"text":"Citi analyst Peter Lee predicted that the upcycle could extend beyond seven years if AI momentum holds but cautioned against assuming a permanent break from the past."}],[{"start":418.1,"text":"“Many investors still don’t believe the industry’s cyclical nature has fundamentally changed,” he said. “This cycle may be stronger and longer-lasting, but cycles won’t disappear.”"}],[{"start":436.3,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777451070_7483.mp3"}