The next imbalance in markets caused by semiconductors, by Claus Aasholm

By Victoria Fellows

October 18, 2025

The memory market, a key driver of the semiconductor cycle, is experiencing intense shifts as traditional practices give way to constant, full-capacity manufacturing. Before 2019, memory companies manipulated production in hopes competitors would follow suit, but that era has ended; manufacturing is now nonstop, which led to drastic consequences in the 2022/23 downturn, with top memory companies suffering a brutal average negative gross margin of 17% in Q1-2023. This destructive phase pushed companies to seek new business models.

The surge in demand for large language models (LLMs) and the prominence of Nvidia accelerated a pivot toward High Bandwidth Memory (HBM), transforming business strategies. While Samsung responded quickly, SK Hynix now leads, signaling intentions to abandon the cyclical memory market due to long-term HBM contracts and stable pricing. HBM capacity for 2025 is already sold out, and 2026 will soon follow. The top three memory companies have benefited, but smaller competitors continue to face sluggish profit recovery and lack the capital for new investments.

Embargoes on AMD and Nvidia’s GPUs destined for China have affected both general memory and HBM revenue growth, with such policies expected to persist into Q3-2025. HBM, though representing only 18% of revenue for market leaders, is squeezing out capacity for conventional DRAM and NAND products, which will impact industrial sectors further. HBMs require 2–3 times more manufacturing capacity than standard DRAM; their price has risen steeply—from 4–5x DRAM initially to 8–12x as markets shift toward HBM3E, with expectations of even greater disparity with HBM4.

Micron’s Q3-2025 financial results highlight this transformation: the company beat its revised guidance, achieving $11.3B revenue and massive profit growth, with net income rising 69.8% quarter-over-quarter and 261% year-over-year. Even with softer Q4 growth projections, profitability appears set to increase further. Gross margins are forecast to exceed 50%, and net margins to climb from 28.3% to 33.9%—giving Micron the third highest net margin among major semiconductor firms, surpassed only by Nvidia and SK Hynix. This turnaround from the harsh -62.6% net margin of Q1-2023 illustrates why memory companies are so eager to move beyond the commodity cycle.

Micron’s updated divisional structure provides more transparency, particularly for its cloud business, regarded as the key future growth engine and an avenue away from cyclical volatility. The Mobile and Client division now rivals the Cloud Memory division in size, while smaller segments try to remain significant. Importantly, Cloud Memory encompasses more than HBM, as cloud servers consume a range of DRAM types. The industry’s reorganization, driven by competitive and resource pressures among divisions, aims to optimize for growth and resilience in a volatile landscape.

Overall, the semiconductor market’s current imbalance is shaped by rapid shifts to high-value memory products, sustained demand from AI and cloud technologies, and ongoing geopolitical disruptions. This is redefining how top memory companies operate, profit, and strategize for the future.

Written by Claus Aasholm

https://clausaasholm.substack.com/

Claus is an expert at peeling back the layers of polished corporate messaging. His curiosity drives him to explore semiconductor companies, focusing on the complexities of their supply chains—both upstream and downstream. He compares companies to their competitors, uncovering key insights that often go unnoticed.