The DRAM industry is currently going through a tectonic change. Yet historical cycles are crashing up against this unprecedented demand spurred by the infusion of continuing artificial intelligence (AI) infrastructure. As leading innovators such as Samsung are realizing, the market is shifting dramatically. At the same time, the industry faces serious supply chain problems, exacerbated by massive production cut-backs and soaring costs. Analysts presume that, although innovation and expansion can provide routes towards relief, great hurdles still lay ahead.
In 2023, memory and storage manufacturers such as Samsung reduced production by half. They made this courageous decision in order to stabilize prices that spiked drastically due to unprecedented demand for DRAM in AI data centers. It’s the need for high-performance computing resources that fuels this trend. These resources, which easily support GPUs and new accelerators, are the lifeblood that AI applications run on. Because of this, DRAM supply is being pulled away from other applications, causing a massive ripple effect throughout multiple sectors.
Samsung’s Innovations and Production Goals
Furthermore, the ownership and acquisitions policy has caused Samsung to become a major player in the DRAM market. As the company showed back in 2024, the ability to produce a 16-high stack through hybrid bonding technology is possible. And innovation, it seems, is a space Samsung isn’t willing to concede. They’re currently investigating the development of a stack of 20 dies, which would massively increase overall memory capacity.
The significance of these efforts and innovations is hard to understate. High-Bandwidth Memory (HBM) chips, which employ a 12-die DRAM stack, play an important role in today’s most advanced applications. Take, for example, the B300 which employs eight HBM chips, highlighting the essential importance of DRAM to high-performance computing.
Beyond that, Samsung aims to start moving production into a new, still-under-construction facility in Pyeongtaek, South Korea by 2028. This new plant will more than double Samsung’s capacity. Most importantly, it is meant to address the surging need for DRAM, particularly in AI-based data centers.
“Relief will come from a combination of incremental capacity expansions by existing DRAM leaders, yield improvements in advanced packaging, and a broader diversification of supply chains.” – Shawn DuBravac
The Demand Surge for AI Data Centers
The unprecedented demand for DRAM from AI data centers has turned the industry upside down. There are now close to 9,000 global data center facilities, with another 2,000 or so on the drawing board or already under construction. Nvidia’s data center business has experienced explosive growth. It rocketed from less than $1 billion in industry revenue in Q4 2019 to an expected $51 billion by Q4 2025.
Additionally, this increase in demand has created a major strain on memory suppliers. With DRAM playing a critical role in the scales of AI computing, the competition for these resources has only increased. As analysts have frequently warned, such demand dynamics will ensure that prices remain high.
“In general, economists find that prices come down much more slowly and reluctantly than they go up. DRAM today is unlikely to be an exception to this general observation, especially given the insatiable demand for compute.” – Mina Kim
Experts widely agree that a combination of incremental capacity expansions and innovations can help relieve at least some supply pressures. Still, they caution that the broader market won’t see much relief until beyond 2028. A reference to the full report Intel CEO Lip-Bu Tan notably emphasized the timeline for supply constraints to be alleviated. He added that big progress is not going to occur overnight.
Addressing Supply Chain Challenges
As the DRAM industry navigates these challenges, two primary strategies emerge: innovation and the construction of additional fabrication facilities. Mina Kim outlined these approaches succinctly:
“There are two ways to address supply issues with DRAM: with innovation or with building more fabs.”
Now, leaders of advanced manufacturing have an opportunity to invest in advanced packaging technologies that will minimize yield and increase efficiency. These innovations would improve our current production rates without the urgent need for new fabs. Even these advancements will take time to come to fruition and they fall far short of meeting the current demand.
Whether you agree, disagree or are just skeptical, companies are clamoring to change and diversify their supply chains. They frequently meet new tests in resourcing and logistics. The continuing geopolitical situation only multiplies that uncertainty across the global supply chain for memory products.