Taiwan's Nanya Technology, a major memory-chip maker, told investors that DRAM prices and its unusually strong profitability should remain firm in the fourth quarter, thanks to a market that is still short on supply. The company's comments come after a third quarter in which selling prices for DRAM chips climbed more than 60%, helping revenue jump 62% from the prior quarter to NT$133.7 billion.
Memory chips are a classic boom-and-bust business. When supply is tight, even small price increases can quickly show up in profits, because the cost of running a wafer fab is largely fixed. Nanya's third-quarter results illustrate that dynamic: shipments actually fell about 4% to 6% as the company drew down inventories, yet revenue still surged on the back of higher prices.
That pricing power pushed Nanya's gross margin up 6.2 percentage points to 86% in the third quarter. For context, most manufacturers would consider a gross margin in the 30% to 40% range healthy; 86% is exceptional and reflects the high operating leverage of a memory fab, where the cost of producing an additional chip is relatively low once the factory is up and running.
Why DRAM prices are staying firm
The memory market has been undersupplied for several quarters, a situation that has allowed Nanya and its rivals to raise prices aggressively. The company said it expects this tightness to persist into the fourth quarter, supporting both prices and margins.
Demand drivers are also shifting. Nanya said AI infrastructure-related products now bring in more than 20% of revenue, with DDR5—a newer, faster type of memory used in data centers and high-end servers—accounting for 10% of revenue. That ties the company's fortunes more closely to spending on artificial intelligence, which has been a key growth area for the broader semiconductor industry.
But supply doesn't respond quickly. Nanya's new 5A factory won't start installing equipment until the first quarter of 2027, with capacity targeted at 30,000 wafers a month by the end of 2028 and 50,000 by the end of 2030. That timeline highlights a fundamental feature of the memory business: it takes years to plan, build, and equip a new fab, so a tight market can stay tight longer than many expect.
What it means for investors
For Nanya, the next quarter is mostly a DRAM price story. With an 86% gross margin, the company's profitability is highly sensitive to incremental changes in selling prices. If prices hold, margins should remain strong; if they slip, the impact on earnings could be swift and significant.
The longer-term takeaway is about timelines. New capacity takes years to come online, so the current undersupply could persist for a while. Nanya's 5A fab schedule is a reminder that meaningful "self-help" on supply is more a 2027-2030 story than a next-quarter one. In the meantime, the company's results will be closely tied to the trajectory of DRAM prices and the pace of AI-related demand.
For everyday investors, Nanya's update is a window into the broader memory-chip cycle. When supply is tight, companies like Nanya can see profits soar; when supply catches up, the reverse can happen just as quickly. The AI boom has added a new layer of demand, but the cyclical nature of the business remains.
Investors will be watching whether DRAM prices continue to climb in the fourth quarter and whether AI-related revenue keeps growing. The company's comments suggest that, for now, the cycle is still in the upswing.
