Analysis: Soaring Legacy Chip Prices Spark Windfall — and Risk — Across Supply Chain

The artificial intelligence (AI) boom is significantly impacting the memory chip market, particularly affecting the prices and supply of legacy DRAM components used in a wide array of electronics such as smartphones and servers. This surge in AI-driven demand, especially for advanced memory types like DDR5 and high-bandwidth memory (HBM), has shifted manufacturers’ priorities toward high-margin products. As a result, companies such as Samsung Electronics, SK Hynix, and Micron Technology—who collectively controlled 95% of the global DRAM market as of March 2025—have scaled back the production of older memory chips, causing prices for these components to spike. For instance, DRAM prices rose by 171.8% in the third quarter of 2025 year-on-year, according to TrendForce. This is not a typical semiconductor market cycle, but rather a special situation driven by AI needs, creating shortages that disrupt the supply chain and alter profit distributions among industry players[para. 1][para. 2][para. 3][para. 4].

Large, established chipmakers are the primary beneficiaries of these dynamics. Samsung’s memory division reported sales of 26.7 trillion won ($18.7 billion) in Q3, a 20% increase compared to the previous year, and achieved an operating profit of 7 trillion won. SK Hynix saw its revenue climb 39% year-over-year to 24.45 trillion won and its operating profit rise by 62% to 11.38 trillion won, with a robust gross margin of 57%. Micron experienced a 46% revenue increase to $11.32 billion in its fiscal fourth quarter, boosting its gross margin over nine percentage points to 45.7%. SanDisk also benefitted in the NAND flash segment, generating $2.3 billion in revenue (up 23%) and recording a net profit jump of 331% quarter-on-quarter to $181 million, with expectations for a 12-percentage-point gross margin increase in the next quarter[para. 5][para. 6][para. 7][para. 8].

Chinese firms have found opportunity amidst the constrained supply of legacy DRAM. Companies like GigaDevice Semiconductor have ramped up production of niche DRAM, capitalizing on increased demand for DDR4. GigaDevice's DRAM margins moved from single digits at the start of the year to much higher in Q3, with DDR4 chips now making up more than half of its DRAM revenue. The firm’s Q3 revenue rose 31.4% year-on-year to 2.68 billion yuan ($377 million), with net profit up 61.1% to 508 million yuan and a gross margin of 40.72%. Other players, like Dosilicon, also improved profitability. Companies are stockpiling inventory, anticipating ongoing supply constraints and sustained price strength through 2026[para. 9][para. 10][para. 11][para. 12].

Module makers—turning raw chips into consumer products—are betting on continued price rises, with companies like Longsys, Biwin, and Techwinsemi reporting annual revenue gains of 54.6%, 68.1%, and 79.5%, respectively. Profitability has soared, though the strategy of large stockpiles is risky: a market downturn could result in significant write-downs. Distributors, which operate between chip producers and product companies, are forced to absorb higher costs and have seen only marginal growth, with razor-thin margins as inventory declines[para. 13][para. 14][para. 15][para. 16][para. 17].

Conversely, equipment suppliers upstream in the supply chain, such as Naura Technology, Advanced Micro-Fabrication Equipment, and Montage Technology, are experiencing steady demand due to expanded production investments by manufacturers. These suppliers are comparatively insulated from memory chip price swings and emerged as early winners in the sector’s cyclical upturn[para. 18][para. 19].