The global boom in artificial intelligence has triggered a severe shortage of essential storage chips, doubling prices in just six months, according to Khein-Seng Pua, CEO of Phison Electronics.
The supply-and-demand imbalance for NAND flash memory will likely persist for several years, Pua warned, as chipmakers remain cautious about building new factories.
Prices surge dramatically
The price surge has been dramatic. Pua noted that prices for TLC 1-terabit NAND, a common storage component, skyrocketed from US$4.80 in July 2025 to US$10.70 in November 2025. Even older, low-density MLC chips have doubled in cost. The rebound has accelerated since October 2025, with some chip categories jumping over 100% since the spring of 2025.
Phison, a major provider of NAND controllers, is riding the wave. The company reported third-quarter 2025 revenue of NT$18.14 billion (US$560 million), a 30% jump from the previous year. Its gross margin rose to 32.4%, and net profit hit NT$72.27 billion, the highest in three quarters. October 2025 revenue surged 90% year over year, fueled by a massive 280% annual increase in PCIe SSD controller shipments.
The company credited stronger margins to rising memory prices and inventory revaluation gains. However, higher research and development spending on advanced technology squeezed operating profit, cutting its operating margin to 7.9%. Phison remains optimistic for the fourth quarter of 2025, expecting continued growth.
Phison CEO Khein-seng Pua. Credit: DIGITIMES
AI and cloud drive structural growth
Pua explained that the intense demand from AI workloads is fueling "structural growth" in data storage. Hyperscale cloud service providers are rapidly expanding their data centers to keep up.
This trend is also accelerating the industry's shift away from traditional hard disk drives (HDDs) to faster solid-state storage, putting even more pressure on the NAND supply.
Pua explained that NAND manufacturers have been reluctant to expand their production capabilities after suffering through years of poor profitability. He warned that new production lines are not expected to be operational until late 2027. With demand from AI and cloud services continuing to rise, Pua stated that tight supply conditions are expected to become the new industry standard.
Phison pivots to high-margin segments
Phison secured most of its 2026 NAND supply during a lull midyear 2025 and has extended long-term agreements with six suppliers through 2026. Still, Pua said capacity is insufficient, as most manufacturers are already "sold out" through 2026.
Phison's inventories stood at NT$1.02 trillion (US$31.53 billion) at the end of the third quarter of 2025, mostly for non-retail markets. Average inventory turnover was 224 days. Pua said that while stock levels may decline slightly as prices rise, the reduction will be limited. In response to the shortage, Phison is prioritizing its enterprise and industrial clients. Pua said the company is deliberately cutting back on retail shipments to focus on these higher-margin customers. The company expects enterprise SSD sales to grow to 20–30% of its total revenue by 2026.
The company is also advancing its "AI Adaptive+" solution. This technology utilizes PCIe interfaces to enhance AI efficiency and reduce power consumption. By partnering with major GPU and server vendors, the program aims to offset reduced DRAM use as prices climb.
Phison's enterprise storage business continues to grow as major cloud providers adopt its SSDs. In mobile markets, its eMMC and UFS products are gaining share, while automotive-grade UFS shipments are also ramping up.
Article edited by Jerry Chen
