On November 28th, Changxin Storage launched the latest LPDDR5DRAM storage chips have become the first domestic brand to launch independently developed and produced LPDDR5 products, achieving a breakthrough of zero in the domestic market. Compared with the previous generation LPDDR4, Changxin LPDDR5 has a 50% increase in single particle capacity and speed, reaching 12Gb and 6400Mbps respectively, while reducing power consumption by 30%. From the perspective of product application and market space, the LPDDR5 chip can bring faster speed experience and lower power consumption to the mobile electronic devices it carries. The birth of the first domestically independently developed and mass-produced LPDDR5 product is optimistic about the opportunities for future industrial chain cycle recovery.

01 | Achieve a breakthrough in DRAM high-end storage technology

Although China has initially completed its strategic layout in the field of storage chips, due to its late start and occasional technological lockdowns, there is still a certain gap in the DRAM high-end storage product market compared to leading Korean and American manufacturers. The global storage chip market share is basically occupied by countries such as South Korea, Japan, and the United States. At present, the DRAM market is dominated by three manufacturers: Samsung, SK Hynix, and Micron, with a total market share of over 95%. The market is highly concentrated, which makes Chinese manufacturers have low bargaining power for DRAM chips. Chinese leaders Hefei Changxin and Fujian Jinhua have small-scale production capacity, but their overall market share is still relatively low. The latest LPDDR5 DRAM storage chip launched by Changxin Storage means that China has achieved a technological breakthrough in high-end DRAM storage products. As the first domestic brand to launch independently developed and produced LPDDR5 products, Changxin Storage has achieved a breakthrough in the domestic market, which is another milestone in accelerating the transformation of DRAM industrialization achievements. At the same time, it has also accelerated the domestic DRAM chip industry into the LPDDR5 track. From the perspective of product application and market space, the LPDDR5 chip can bring faster speed experience and lower power consumption to the mobile electronic devices it carries, comprehensively improving product performance, and its application scenarios and market share will also experience rapid growth. According to the official website of Changxin, the LPDDR5 product of Changxin Storage has been validated on mainstream domestic mobile phone manufacturers such as Xiaomi and Transsion, and plans to accelerate its market-oriented implementation comprehensively. At present, the application of LPDDR5 on mobile devices is constantly expanding, and Changxin Storage's LPDDR5 product is expected to empower more mobile devices to meet the growing storage needs of the digital age. After the third quarter of 2023, the global storage chip market has entered a development stage of bottoming out and slowly rising. Although macroeconomic uncertainty may persist in the coming year and the traditional consumer electronics market remains weak, demand for AI and big data centers continues to grow, especially for high-end servers, which remain strong. In this context, Changxin Storage's breakthrough in LPDDR5 products will greatly enhance the confidence of domestic substitution of mainstream storage chips. It is expected that DDR5 and HBM products with different capacities will also accelerate the pace of domestic substitution in the future. It is expected that Changxin Storage LPDDR5 will benefit the entire domestic storage industry chain, including upstream equipment and materials to downstream modules and end customers.

02 | DDR5 Demand Will Grow Significantly

In 2023, the demand for high bandwidth memory (HBM) and DDR5 triggered by generative AI has led to some significant growth momentum in the DRAM market. In July 2023, the JEDEC Solid State Storage Association officially released the DDR5 SDRAM Memory Standard Specification. Driven by both market and standard upgrades, DDR4 memory, as the mainstream memory standard, will be replaced by DDR5 in some high-performance application areas. According to a report by foreign technology media WccFtech, a significant change in mobile phones in 2024 is the rise of terminal AI, including various chipsets such as Snapdragon 8 Gen 3, Dimensity 9300, and Exynos 2400, all with added AI elements. This means that users cannot run these AI elements locally without larger memory space, which will bring new development opportunities for LPDDR5 applications. Recently, Macquarie also released a report stating that typical smartphones currently come with 8GB of memory; The terminal side AI for running image generation function requires approximately 12GB of memory for the phone; A device with digital AI assistant function requires approximately 20GB of memory. It is reported that Chinese mobile phone manufacturers are constantly increasing the memory capacity of their phones. Some phones, including the Xiaomi Redmi K60 Ultimate Edition, OnePlus Ace 2 Pro, and realme Genme GT5, have already provided 24GB versions. In addition to the mobile end, the high speed and large capacity advantages of DDR5 will also meet the growing memory needs of servers, data centers, and high-performance computers. As a high value-added DRAM, the demand for DDR5 may increase due to various factors. Industrial grade storage and memory manufacturer Weigang predicts that demand from the PC market has significantly rebounded, especially the increase in PC memory capacity, which will drive the growth of the DDR5 market. It even predicts that in the first half of 2024, DDR5 is expected to surpass DDR4, forming a highly anticipated "golden cross" in the market.

03 | Storage vendors turning to compete in the DDR5 market

Currently, as DDR5 gradually dominates the storage market, major storage manufacturers around the world are investing in the research and development of related products to cope with potential market growth in the future. In the past year, under the influence of measures such as production reduction and inventory control by major storage companies, coupled with the demand driven by AI, the storage market has begun to recover and develop. At present, the three major DRAM factories, including Samsung, SK Hynix, and Micron, have mass-produced DDR5, but their proportion in production capacity is still not high. However, driven by the demand for large memory, DDR5 is moving towards mainstream specifications, driving up DDR5 shipments in 2024. Samsung Electronics also plans to focus on selling high value-added products such as High Bandwidth Memory (HBM) from the fourth quarter of 2023 to meet the growing demand for new interfaces such as DDR5, LPDDR5x, PCIe Gen5, and UFS 4.0 in the market. With Changxin Storage breaking through the LPDDR5, Lanqi Technology, a leading domestic memory interface chip enterprise, has also taken the lead in the industry in trial production of the second generation of DDR5 products and launched the third generation of DDR5 products. Market research firm Omdia predicts that the sales ratio of DDR5 is expected to exceed 20% in the fourth quarter of 2023 (based on server DRAM), and is expected to further increase to 51% in 2024.

04 Jingtai Viewpoint | Optimistic Investment Opportunities for the Cycle Recovery of Domestic Storage Industry Chain

The price increase categories on the storage wafer end have increased, and some have been transmitted to the finished product end. Domestic manufacturers have released their mid year 2023 performance reports, and overall, the fundamentals in the second quarter have stabilized or improved compared to the previous quarter. The expected improvement in the fourth quarter is relatively clear. Domestic manufacturers mainly focus on niche storage design or mainstream storage module links. In the second quarter, the gross profit margin of most storage manufacturers has reached a low level in recent years, inventory has peaked, revenue/shipment volume has increased month on month, and some manufacturers have improved their profit margin in the second quarter. In the second half of the year, as inventory decreases and demand gradually returns, industry segmentation leaders are expected to see opportunities for performance recovery in the future. We are optimistic about investment opportunities under the cycle recovery of the domestic storage industry chain combined with the trend of localization. Suggest paying attention to storage modules, storage chip design, and storage supporting chips. END