AI Storage New Cycle: The Siege of NAND and the Defense of HDD
The report analyzes the sustainability of the rise in NAND contract prices and the cyclical position. On the demand side, AI drives the growth of SSD demand, with global NAND shipments expected to approach 2000EB by 2028. Capacity expansion is cautious, and NAND prices may continue to rise until 2026. HDD still has a cost advantage, but future applications will focus on cold data storage
Since Q1 2025, NAND contract prices have more than doubled. This report analyzes the sustainability of this cycle and the judgment of its position through a review of historical NAND cycles, supply and demand calculations under AI scenarios, and the impact on the HDD industry.
Abstract
Demand Side: Resonance of cloud and edge AI strongly opens up the SSD demand ceiling. The training and inference of AI models impose higher demands on enterprise-level SSDs in terms of write speed, IOPS, capacity, and durability. Among them, we believe that LLM rapid loading & KV Cache, RAG will become large-scale application scenarios for SSDs in the future. Coupled with the expectation of high growth in edge inference demand, the storage capacity of mobile phones and PCs is expected to grow significantly. We estimate that global NAND Flash shipments are expected to approach 2000EB by 2028, maintaining nearly 30% high growth over the next three years.
Supply Side: Cautious capacity expansion is expected to support price increases over a longer time dimension, with a stable yet changing NAND oligopoly pattern. Overseas manufacturers are cautious about NAND capacity expansion, primarily transforming to high-density, high-capacity technology routes. Currently, the competitive landscape of NAND Flash is stable, with the top 5 global NAND Flash market revenues accounting for over 90% in Q3 2025. Among them, Kioxia and SanDisk's joint new factory has been put into production in Q3 2025, introducing the advanced BiCS8 process, which will contribute revenue in 1H26. Considering supply and demand, we expect supply tightness to last at least until the end of 2026, and NAND manufacturers are likely to support multi-quarter price increases through supply-side control, with NAND prices possibly remaining high in 2026. Additionally, Yangtze Memory's capacity expansion and the advantages of its Xtacking architecture are also expected to reshape the domestic NAND supply pattern.
HDD: Still a cost-effective choice for cloud computing vendors' cold storage. The core advantages of HDD compared to SSD mainly lie in unit storage cost, TCO, and physical storage performance. Looking ahead, as NAND technology upgrades, the cost advantage of HDD will weaken (currently the price difference is 4-6 times). We believe that future HDD applications will focus on ultra-large-scale data lakes and cold data archiving, with a market growth rate of about 15% over the next three years.
Main Text
NAND Cycle Review: Oligopoly Game Under Long Cycles
By reviewing the historical cycle of the global NAND market, we summarize the following five characteristics:
1) Long cycle span and severe price fluctuations: Reviewing the global NAND market, a complete cycle typically spans over four years. During this period, NAND prices can fluctuate by over 80%, and the net profit margin of manufacturers can vary by +-40%.
2) Severe supply-demand mismatch: Historically, the demand for end devices has changed rapidly due to product updates and macroeconomic factors, while highly concentrated supply leads to a lag in capacity expansion, with storage expansion cycles typically taking more than two years As the short-term demand surge brought by the pandemic in 2020 led to a rapid price increase of related products in 2021.
3) Different expansion strategies of manufacturers lead to differentiated competition: Due to the highly concentrated competition among original manufacturers, inconsistent expansion decisions among manufacturers have also exacerbated the cyclical fluctuations. In the past, Samsung's strategy focused on "counter-cyclical investment," exchanging price pressure for market share to achieve high returns during upward cycles. In contrast, Micron has been more of a passive follower, resulting in greater fluctuations in ROE.
4) Technological innovation drives the cycle: During the transition period between old and new technologies, old capacities rapidly depreciate and exit the market, while new capacities face insufficient effective supply due to high technical difficulty and low initial yield, such as the transition from 2D NAND to 3D NAND in 2016-2017, causing a temporary supply-demand gap.
5) Downstream inventory cycle overlap: The fluctuations in terminal demand are amplified through the "bullwhip effect" in the inventory management of brand manufacturers, module manufacturers, and original manufacturers, with downstream manufacturers' inventory levels typically further amplifying real-time price fluctuations.
Chart 1: Global NAND Flash Cycle Review
Source: Trendforce, CICC Research Department
Chart 2: Historical ROE Performance of Overseas Storage Original Manufacturers
Note: The fiscal year-end dates for SK Hynix/Micron/Samsung Electronics/Seagate/Western Digital are the end of December/August/December/June/June respectively, with Seagate's outliers excluded.
Source: Bloomberg, CICC Research Department
What is different about this cycle?
Phase 1 4Q24-2Q25: Price rebound driven by supply contraction. In the second half of 2024, the three major original manufacturers will begin to continuously reduce production in response to the downward cycle, with downstream channels and module manufacturers' inventories dropping to low levels, and the effects of supply contraction beginning to manifest. At the same time, policies such as national subsidies in 1Q25 will stimulate demand for smartphones, PCs, etc., leading to a continuous decline in inventory.
Phase 2 3Q25 to present: Structural demand surge driven by AI. With the increase in AI server shipments, the demand for enterprise-level SSDs has doubled. The three major original manufacturers will shift capacity from NAND/DDR4 to meet the demand for higher-margin products such as HBM and DDR5, resulting in a structural shortage of NAND Flash The price increase has significantly risen, with SanDisk as a representative, having implemented multiple price increases since Q2 2025.
Chart 3: NAND Price Increase Rhythm in 2025
Source: Trendforce, CICC Research Department
AI Demand: Cloud Resonance
AI-driven SSD demand is growing rapidly, bringing different requirements for higher write speeds, IOPS, large capacity, and durability. Core scenarios can be divided into training and inference:
► Training Scenario: Ultra-large-scale training datasets pose core demands for ultra-large capacity and low-cost storage. Due to HDDs having a long delivery cycle of at least over a year, there is an overflow demand for SSDs, requiring higher density and larger capacity.
► Training Scenario: Training large models typically takes months. To prevent data loss from issues like cluster failures, systems need to frequently write model parameters from memory to disk, requiring high random write IOPS and high durability from SSDs.
► Inference Scenario: When starting inference services or switching models, TB-level model files need to be loaded from SSD to video memory. In long text generation, when video memory is insufficient, some KV Cache may be swapped to local NVMe SSD for temporary storage, leading to a demand for ultra-high-speed interface upgrades for SSDs.
► Inference Scenario: In RAG (Retrieval-Augmented Generation), vector database queries need to be performed within milliseconds, and the dense operations of random reads require extremely low latency, high IOPS, and stability under sustained high loads.
► Inference Scenario: AI-generated content storage mainly involves storing AI-generated images, texts, and numerous model versions, primarily requiring high capacity, which can also opt for HDDs.
We believe that particularly the AI demand represented by the first two inference scenarios will continue to grow significantly, and the ongoing iteration of multimodal models and the exponential growth of user tokens will drive SSD demand into a longer-term upward cycle.
Chart 4: Analysis of AI-Driven SSD Demand Scenarios
Source: Kioxia official website, CICC Research Department
Chart 5: Analysis of AI-driven SSD Demand Scenarios and Quantifiable Dimensions
Source: Kioxia official website, Western Digital official website, SanDisk official website, CICC Research Department
From the demand side, both edge and cloud sides benefit from the storage capacity upgrade brought by generative AI. According to TechInsights' forecast, with the increase in the penetration rate of AI smartphones and AI PCs, the average storage density per smartphone/PC is expected to achieve an average growth rate of 16%/13% over the next four years, leading to an increase in edge SSD demand. Combining the above cloud-side model phase demand analysis, we expect global NAND Flash shipments to approach 2000EB by 2028, maintaining a high growth rate of nearly 30% over the next three years, resulting in a new round of sustained strong storage demand increase.
Chart 6: Global NAND Flash Bit Shipment Forecast (Unit: EB)
Source: Kioxia official website, TechInsights, IDC, CICC Research Department
Supply: Cautious Capacity Expansion
Overseas manufacturers are cautiously expanding production, primarily focusing on high-density and high-capacity technology transformation. According to the latest CY3Q25 earnings call, the three major overseas manufacturers are taking a cautious approach to NAND capacity expansion, concentrating more resources on DRAM expansion and the upgrade of 1c/1γ production. SanDisk and Kioxia are jointly developing NAND BiCS FLASH technology through a joint venture, with their combined wafer capacity accounting for 30% of the global total, and we expect nearly 600,000 wafers. Kioxia's K2 factory in the north is expected to start production in September 2025 and contribute revenue in 1H26. In addition, the latest upgrade of the BiCS 10 technology will significantly enhance storage capacity per unit area. Kioxia expects global bit shipments to achieve a growth of 17-18% in 2026, and through smooth capacity ramp-up and the transition to BiCS 8 and 10 technologies, it is expected to achieve shipment growth above the industry level. We believe that manufacturers are likely to support price recovery through supply-side control Chart 7: Highlights from the CY3Q25 Performance Meeting of Storage Original Manufacturers
Note: The figures for 3Q25, 4Q25, and 2026 in the chart are based on calendar year standards.
Source: Bloomberg, CICC Research Department
Judgment of Current Cycle Position
We expect NAND prices to remain high in 2026, with a high certainty of price increases in 1H26. Among them, the price tolerance decreases in the order of data centers/enterprise, PCs, and mobile phones.
Data Center/Enterprise: Based on the discussions above regarding AI training and AI inference demand, we believe this will be the largest source of future SSD demand. Kioxia and SanDisk's enterprise SSDs have been certified by several large-scale cloud computing customers and will begin to ramp up production in 2026. Additionally, long-term agreements with major CSP customers have been signed through the entire year of 2026, with some large customers seeking long-term supply agreements for 2027, reflecting the sustainability of this cycle. Among the original manufacturers, Kioxia has the largest exposure in the data center business (30%+), and will further release capacity through the expansion of the K2 factory next year.
PC and Mobile Phones: We believe that PC and mobile phone customers will face significant pressure from rising storage costs, with Android phone customers under more pressure. We expect that in 2026, some mobile phone models will pass on costs through price increases and reduce the shipment proportion of mid-to-low-end models, leading to a single-digit percentage decline in global mobile phone shipments in 2026.
We believe that supply tightness will last at least until the end of 2026. As of November 2025, the current contract price for NAND TLC 512Gb has increased by approximately 140% compared to previous lows. Referring to the previous upcycle from early 2016 to the end of 2017, NAND prices continued to rise for over 6 quarters, with a cumulative increase of 150%-250%. The core driving factors were on the supply side: the technological transition from 2D to 3D NAND, with early 3D NAND yield ramping up slowly, severely limiting supply; on the demand side: smartphones entering a large-capacity upgrade cycle, with the iPhone 7 eliminating the 16GB version and expanding capacity options to 256GB, with Android phones following suit.
We believe that this cycle, under a more stable competitive landscape, is primarily driven by AI data center demand, combined with the subsequent increase in end-user demand, which is expected to bring about more sustained and steep demand growth. We recommend paying attention to the recent progress of long-term agreements between original manufacturers and major customers Chart 8: DRAM and NAND Contract Prices and Spot Prices
Note: Statistics are as of December 2025;
Source: Bloomberg, China International Capital Corporation Research Department
Chart 9: Historical CAPEX of the Three Major Manufacturers
Note: The fiscal year in the chart; Micron's fiscal year ends on August 31 each year, while SK Hynix and Samsung's fiscal years align with the calendar year.
Source: Bloomberg, China International Capital Corporation Research Department
Chart 10: CAPEX as a Percentage of Revenue for the Three Major Manufacturers
Note: The fiscal year in the chart; Micron's fiscal year ends on August 31 each year, while SK Hynix and Samsung's fiscal years align with the calendar year.
Source: Bloomberg, China International Capital Corporation Research Department
New Opportunities for Joint Ventures Under NAND Oligopoly Competition
The Competitive Landscape of NAND Flash is Steady Yet Changing
The core components of SSD modules mainly include NAND Flash, main control chips, and DRAM cache chips, with NAND Flash accounting for the highest value at approximately 75-80%, and main control chips accounting for about 5-15% of the cost.
The three major manufacturers represented by SK Hynix, Micron, and Samsung Electronics primarily operate under the IDM model, covering the design of NAND chips, main control chips, and firmware, as well as the sales and promotion of their own brands.
Kioxia operates more under the OEM model, with Apple and Dell being major clients, defining SSD specifications based on customer needs, and also possessing self-developed main control chips SanDisk has primarily played the role of a brand owner in the past, and for consumer-grade and mid-to-low-end products, it also considers sourcing main control chips from third-party design companies, integrating and assembling the designs and firmware itself.
Chart 11: Core Components of SSD
Source: chiphell official website, CICC Research Department
Chart 12: NAND Industry Chain Overview
Source: Various company official websites, CICC Research Department
After multiple mergers and acquisitions and splits, the competitive landscape of the NAND market is relatively stable and concentrated. According to Trendforce data, in Q3 2025, the global NAND Flash market revenue top 5 are Samsung Electronics (32%), SK Hynix (19% including Solidigm), Kioxia (15%), SanDisk (12%), and Micron (13%). The competitive landscape in the enterprise SSD market is similar, with the top 5 revenues in Q3 2025 being Samsung (35%), SK Hynix + Solidigm (27%), Micron (14%), Kioxia (14%), and SanDisk (4%). Based on the lack of significant expansion plans from the three major manufacturers for NAND, we believe that with the capacity release of the joint venture factories of SanDisk and Kioxia in 2026, the market share of the two SSDs is expected to further increase. Additionally, the expansion of Yangtze Memory Technologies and the advantages of its Xtacking architecture are also expected to reshape the domestic NAND supply landscape.
Chart 13: Changes in the Global NAND Manufacturer Competitive Landscape
Source: Company websites, China International Capital Corporation Research Department
Chart 14: Competitive Landscape of Global NAND Flash Manufacturers from 3Q22 to 3Q25 (by revenue)
Source: Trendforce, China International Capital Corporation Research Department
Chart 15: Competitive Landscape of Global eSSD Manufacturers in 3Q25
Source: Trendforce, China International Capital Corporation Research Department
Focus on Mainstream Upgrade Path of 3D NAND Flash
Looking back at the upgrade of NAND technology routes, the two core trends of 3D NAND are the improvement of storage density and the increase in the number of vertical stacking layers. Samsung has achieved mass production of 290-layer products with its latest 9th generation V-NAND technology, demonstrating comprehensive leadership in vertical integration capabilities and technology. SK Hynix has also announced the development of 321-layer NAND products while exploring low-temperature manufacturing processes to achieve higher layer breakthroughs. Micron has achieved large-scale mass production of 232-layer QLC NAND. Kioxia and SanDisk are collaborating to develop BiCS FLASH architecture, clearly directing resources towards the research and development of AI performance customized products, such as Super High Ops SSDs and ultra-large capacity SSD products.
Chart 16: NAND Technology Roadmap
Source: TechInsights, China International Capital Corporation Research Department
**Kioxia's core technology is primarily based on Lateral Shrink and CBA (CMOS directly Bonded to Array) **
Lateral Shrink: Helps to reduce the minimum feature size in 3D NAND arrays, thereby increasing the number of storage cells per unit area by reducing the horizontal dimensions while keeping the number of layers unchanged. This achieves the goal of reducing chip area and lowering the cost per bit.
CBA: Places the peripheral CMOS logic circuits below the storage cell array, significantly reducing the area occupied by the NAND chip. At the same time, by manufacturing the NAND array and CMOS logic circuits on two separate wafers and then bonding them together, it maximizes the optimization of the respective processes for the memory array wafer and the CMOS logic wafer.
In September 2025, Kioxia's Fab2 (K2) factory in Kitakami will be put into production, mainly for the production of BiCS FLASH 8. The company expects to start contributing revenue in 1H26 and is also expected to introduce BiCS FLASH 10 in 2026. Compared to the current eighth generation, BiCS FLASH 10 will increase the stacking layers from 218 to 332, with a 59% increase in capacity per unit area, a 33% increase in transmission rate, a 10% increase in write rate per watt, and a 5% reduction in latency.
We see that Kioxia and SanDisk are continuously investing in the R&D of BiCS FLASH technology while also developing customized products for data center AI, achieving better cost control.
Chart 17: Kioxia NAND Technology Roadmap
Source: Kioxia official website, CICC Research Department
Chart 18: Vertical Shrink, CBA, and Stacking Technology
Source: Kioxia official website, CICC Research Department
Declining HDD? Weak Growth Under Stable Returns
HDD: The Cost-Effective Choice for Cloud Computing Vendors' Cold Storage
Currently, 90% of downstream applications for HDDs come from nearline HDD products in cloud computing. Nearline HDDs are core applications in data centers for AI data lakes, used to store raw data, labeled datasets, sensor data, and training corpora for LLMs; The storage layer of cloud computing services is used by cloud service providers to carry massive amounts of low-frequency access data from customers, achieving the highest storage density and lowest operating costs. In the future, with the high increase in AI inference demand, we expect that the storage of AI-generated content will also spur new demand growth for high-density, low-cost HDD products.
Chart 19: Storage Solutions for Different Applications in AI Data Centers
Source: Kioxia Official Website, CICC Research Department
The HDD market is highly correlated with global IT spending and data center construction investments, reflecting significant cyclicality. Since 2016, with substantial investments in data center construction, global nearline HDD shipments and revenues have steadily increased. From 2021 to 2023, due to the macroeconomic slowdown post-pandemic and companies cutting IT spending, HDD demand has significantly declined. Starting in 2024, benefiting from the recovery of data center CAPEX driven by AI, the HDD market is expected to resume growth. According to estimates from Western Digital and IDC data, the average growth rate of global nearline HDD shipments from 2024 to 2028 is about 23%, corresponding to an average revenue growth rate of 15%.
Chart 20: Global Nearline HDD Shipments
Source: Western Digital Official Website, CICC Research Department
Chart 21: Global Nearline HDD Revenue
Source: Western Digital Official Website, CICC Research Department
The HDD market is dominated by three overseas manufacturers, with core components including platters, read/write heads, and controllers, belonging to a highly precision manufacturing industry. Currently, HDD suppliers are primarily Western Digital and Seagate, with a combined market share of around 80%, and the third being Toshiba As a precision electromechanical product, HDD's core components such as platters, read/write heads, and controllers involve high technical difficulty and require a highly precise production process. Currently, the mature technologies are primarily Western Digital's ePMR (Energy-Assisted Perpendicular Magnetic Recording) and Seagate's HAMR (Heat-Assisted Magnetic Recording), which necessitate the coordination of multiple elements including near-field optical structures, special thin-film materials, and ultra-clean production lines.
The delivery cycle for HDDs can exceed one year, with long process upgrade cycles and significant rigid characteristics in production capacity. Due to the high precision required in the manufacturing processes of core components, the delivery cycle for HDDs typically exceeds one year, making it difficult to meet the high demands of large data center clients in a short time. Additionally, the cost and cycle of technology iteration for HDDs are high; Seagate's research and development cycle for HAMR technology has lasted over 20 years, with the first batch of 30TB+ HAMR hard drives set to be released in 2024. Currently, looking at the core suppliers of HDDs, Western Digital and Seagate show insufficient motivation to expand production, preferring to actively control prices through supply-side management to achieve higher profit returns with mature HDD production line technologies.
Chart 22: CY3Q25 Western Digital and Seagate Operating Conditions
Source: Company website, CICC Research Department
Chart 23: Western Digital and Seagate Product Technology Roadmap
Note: All figures in the chart are company estimates.
Source: Company website, CICC Research Department
Will HDD be replaced by SSD in the AI era?
In comparing nearline HDDs and SSDs, the current core advantages mainly lie in unit storage cost, TCO, and superior physical storage performance. The cost per GB of HDDs has a significant advantage over SSDs, with a price difference of 4-6 times; and considering the high CAPEX required for SSD production capacity per EB, although HDDs have relatively higher power consumption, the overall TCO still shows significant advantages. Furthermore, HDDs have better data retention, capable of long-term storage for decades even after power loss Chart 24: Nearline HDD vs SSD
Note: The CAPEX data in the chart is from Western Digital.
Source: Western Digital official website, Trendforce, CICC Research Department
Chart 25: TCO Comparison of HDD and SSD
Source: Western Digital official website, CICC Research Department
Looking ahead, we believe that as NAND technology upgrades, the cost of SSDs will continue to decline, and the cost gap with HDDs is expected to narrow further. At the same time, HDDs rely on precision mechanical technologies such as HAMR, which results in slower capacity growth and higher early-stage costs, while the continuous launch of ultra-large capacity SSD products will increase competitive threats to HDDs.
We believe that in the future, the application scenarios for HDDs will be further segmented and concentrated. Ultra-large-scale data lakes and cold data archiving will still be areas where HDDs have a competitive advantage, while some mid-to-low capacity HDDs and applications in high-performance servers will be replaced by SSDs that have lower power consumption and better reliability.
Chart 26: Data Center SSD and HDD Shipment Volume and Market Share
Note: The predictions in the chart are from CICC Research Department.
Source: Kioxia official website, Western Digital official website, TechInsights, CICC Research Department
Chart 27: Adjusted Gross Margin of HDD Manufacturers
