Chip stocks are plunging. Is it just another panic or a real risk?
Several factors are behind the sell-off, but one of the most interesting is a new report from China. It raised concerns about whether memory makers can maintain current high prices and margins. Let's look at how big a problem this could be.
Chinese company CXMT announced progress in developing a new 4F² DRAM technology. It allows more memory on the same chip area, thus potentially cheaper manufacturing. It wants to introduce the first server DDR5 memories with this technology by the end of the year.
And this is not some small company. CXMT already controlled about 9.5% of the global DRAM market by revenue in Q2 2026, up from 7.6% in the previous quarter.
Why is this a problem for Micron $MU, Samsung and SK Hynix?
The memory industry is currently benefiting from huge demand that manufacturers can't keep up with. The result is rising prices and exceptionally strong margins. But if China starts supplying more and cheaper memory, it could gradually ease this shortage. Prices could then fall, along with profits of the biggest manufacturers.
It's important to understand that although these companies increasingly earn on advanced HBM memory for AI, classic DRAM still makes up a large part of their business.
In fact, according to TrendForce, in Q1 2026 server DDR5 64GB RDIMM brought higher revenue and profitability per processed wafer than HBM. So the idea that classic memory is no longer so important is not accurate.
On the other hand, HBM growth could be exactly what significantly mitigates potential losses from classic memory. Moreover, their production consumes a lot of capacity that manufacturers then can't use for regular DRAM. This limits supply and helps keep prices high.
How do I see it?
I wouldn't call this a fundamental turning point yet. CXMT announced technological progress, but hasn't proven successful mass production of this new technology.
Three things will determine the real impact: whether China can produce cheaply and at scale, whether growing demand can absorb the new supply, and whether HBM growth compensates for potential losses from classic memory.
If China succeeds, I personally think HBM will compensate for a large part of potential losses. But it wouldn't completely protect these companies from margin and profit declines.
How do you see it? Is the current sell-off overblown, or is the market finally starting to take Chinese competition seriously? 👇
