Micron: DRAM Shortages to Persist Through 2027; Insufficient Manufacturing Equipment Capacity Emerges as a New Bottleneck!

In a recent coverage note on memory chip giant Micron Technology, the foreign investment bank Morgan Stanley revealed that Micron Chairman and CEO Sanjay Mehrotra and other senior executives noted during a recent investor meeting that although Micron is actively expanding DRAM production, new capacity will not begin shipping until late 2027 at the earliest. Therefore, the DRAM supply shortage is expected to persist through 2027, with insufficient capacity for certain semiconductor manufacturing equipment being another key factor.

Currently, the robust demand for High Bandwidth Memory (HBM) driven by AI chips remains the primary bottleneck causing the supply shortage across the entire DRAM market. Micron has already achieved its goal of matching its overall DRAM market share with its HBM market share in the third quarter of 2025. The company also anticipates that the future adoption of HBM4E and HBM5, which incorporate custom logic chips, will further drive up HBM prices, costs, and profit margins. This is because the ratio of DRAM capacity consumed during the transition from HBM3E to HBM4/5 could reach as high as 4:1 (previously 3:1). Furthermore, previous data indicates that the current yield rate for HBM manufactured using DRAM stacking remains around 50%–60%, which will further exacerbate the overall imbalance in DRAM supply and demand.

To address this structural shift, the growth of AI and data centers has made DRAM a strategically important asset. Micron recently launched its “Strategic Customer Agreement” (SCA) and has already signed a five-year long-term contract to ensure an appropriate return on invested capital (ROIC), demonstrating operational resilience distinct from previous cycles.

In terms of financial metrics, Micron’s latest quarterly gross margin guidance stands at 81%, and management has set a long-term target in the mid-80% range. Although the market has recently expressed concerns over falling DRAM spot prices and rumors of oversupply, Micron believes these factors will have limited impact and is optimistic that earnings per share (EPS) will reach at least $100 by 2027.

Regarding expansion plans, to support the manufacturing of HBM and advanced-process DRAM, Micron has significantly increased its capital expenditure forecast. Capital expenditures are projected to reach $25 billion in fiscal 2026 and exceed $37 billion in fiscal 2027, with plans to equip all production lines with EUV capabilities. Although Micron is actively expanding production, it expects the first batch of new fabs to begin shipping as early as the end of 2027, with a substantial impact on market supply not anticipated until 2028, at which point the DRAM market may achieve supply-demand balance. During this process, a sufficient supply of critical semiconductor equipment is particularly crucial. However, the current production capacity for extreme ultraviolet (EUV) lithography equipment required for advanced processes is limited, and delivery lead times are relatively long.

Regarding recent geopolitical risks in the Middle East and other regions, Micron emphasized that its production capacity is geographically diversified and that, as a U.S. supplier, it holds a significant strategic competitive advantage over Japanese and South Korean competitors.

Regarding capital returns, constrained by the five-year funding subsidy agreement under the U.S. CHIPS and Science Act, Micron has set a buyback cap for the first two years of the agreement. Currently, the company is prioritizing the use of capital to repay debt and increase dividends. However, Micron expects to launch a very aggressive share buyback program once the restrictions are lifted on December 9, 2026. Overall, Micron continues to benefit from a multi-year upward cycle driven by its leading process technology, the rising proportion of HBM, and long-term customer retention strategies.

During U.S. trading on April 1, Micron’s stock price surged nearly 12% at one point and closed up 8.88% at $367.85 per share, with a market capitalization of $414.837 billion.