Driven by the powerful force of AI, the memory industry is undergoing unprecedented transformation, breaking the previous cycle of boom and bust that lasted only six months to a year. Transcend Chairman Chu Chung-wan stated bluntly that the AI wave is a major change in human history, and this wave of memory shortages and price increases triggered by AI will not end in the short term, but is expected to last two to three years, or even longer.
This wave of memory shortages began to emerge in the third quarter of last year and has yet to ease. Chu Chung-wan stated that the core reason for the shortage is the massive investment in AI by the four major US cloud service providers (CSPs). These companies have invested as much as $700 billion this year and have also proactively paid deposits to memory manufacturers for the next two to three years, securing supplies at any cost. This large-scale rush to buy has directly led to a severe global shortage of memory (including DRAM and Flash). Transcend had previously suspended quoting and delivery due to soaring memory prices to reassess market conditions, demonstrating the severity of the industry's shortage.
Supported by strong demand, suppliers are determined to raise prices. Shu Chongwan confirmed that major suppliers such as Samsung raised prices by as much as 40% in the second quarter, showing no hesitation in adjusting their prices. Faced with price increases from original manufacturers, Transcend had no choice but to passively accept and follow suit to meet the strong demand from end customers. In terms of supply strategy, Transcend primarily relies on long-term agreements (LTAs) signed with major manufacturers such as Samsung and Micron to secure its supply, without engaging in spot market acquisitions. Even with limited supply from original manufacturers, long-term contracts ensure uninterrupted supply, which aligns perfectly with the current industry trend of Samsung and SK Hynix fully shifting to long-term contract models.
Regarding market concerns about inventory and financial status, Shu Chongwan clarified: While Transcend's current inventory exceeds NT$10 billion, with revenue increasing in tandem, the inventory level, after conversion, represents only two to three months of turnover, which is within a normal range. The recent issuance of convertible bonds (CBs) is mainly to address the cash flow needs for accounts payable and inventory purchases resulting from revenue growth, further strengthening its supply capabilities.
Furthermore, Shu Chongwan also mentioned that the technological complexity of the memory module industry is continuously increasing. From the past when simple assembly was possible with just the memory chips, the technology has evolved to encompass multiple complex specifications including DDR3, DDR4, DDR5, and PCIe 3/4/5. This increased technological barrier has lengthened the certification time for end customers and further deepened the interdependence between Transcend and its customers. Looking ahead, he is optimistic about the market, emphasizing that AI model training and inference require large amounts of memory and related components. With the further expansion of CSP investment in 2027 and 2028, the trend of insufficient memory supply will continue. Transcend has already begun contacting some CSP customers, including those in mainland China, and is providing them with products.
