China's AI memory market to hit $111 billion by 2029

Surging demand for artificial intelligence hardware will propel China’s semiconductor memory market to $111 billion by 2029, growing at a compound annual rate of 22 percent as a global supply crunch intensifies, according to a new report from brokerage CLSA.

"Emerging AI applications will drive rapid growth in global and China memory demand concurrently," CLSA's report said, noting that an "unprecedented memory woe" has improved pricing power across the supply chain and spurred capital expenditure.

The forecast projects China's memory shipment volumes will grow 12 percent annually through 2029. The report comes as the global semiconductor market grapples with a memory shortage, dubbed "RAMpocalypse" by some, that has seen prices for some consumer-grade chips double since 2025 and fulfillment times for advanced high-bandwidth memory (HBM) extend out to 2028.

The boom is a direct consequence of massive investment in AI infrastructure, which has seen Nvidia's accelerator revenue increase 1,600% in three years to over $60 billion. For investors, the trend is creating clear winners and losers, benefiting foundries like SMIC and HUA HONG SEMI, while squeezing margins in consumer electronics like televisions.

The AI Engine Driving Demand

The insatiable appetite for AI compute is the primary engine behind the memory market's explosive growth. Since Nvidia (NVDA) reported a massive earnings surge in May 2023, the semiconductor industry has been dominated by the AI buildout. The company's data center revenue, largely from its AI accelerators, soared 92% year-over-year in its most recent quarter. This has had a ripple effect across the sector, with Broadcom's (AVGO) accelerator revenue jumping 840% and AMD's (AMD) rising 289% over the last three years.

This demand for powerful processing has created a parallel demand for high-bandwidth memory (HBM), a key component in AI systems. The pivot by major producers like Samsung and SK Hynix to feed this more lucrative HBM market has tightened supply for consumer-grade DRAM and NAND flash memory, impacting other industries. According to research firm TrendForce, memory's share of the production cost for a 32-inch television has surged from around 7 percent to 15 percent in the first quarter of 2026, forcing brands to rethink their product lineups.

China's Push for Self-Reliance

Against this global backdrop, CLSA highlights a powerful "domestic substitution" trend within China. The report identifies several local companies poised to benefit from both the global AI tailwind and Beijing's strategic push for technological self-sufficiency. Foundries like SMIC (00981.HK) and HUA HONG SEMI (01347.HK) are expected to gain from a rising localization ratio for AI chipsets.

CLSA also pointed to memory manufacturers MONTAGE TECH (06809.HK) and GIGADEVICE (03986.HK) as direct beneficiaries of the AI adoption and price upcycle. In the hardware segment, the brokerage expects demand for high-end optical interconnection to benefit ZHONGJI INNOLIGHT (300308.SZ), raising its price target on the company to RMB1,278 from RMB1,010. The growth creates opportunities for equipment suppliers like AMEC (688012.SH) and ASMPT (00522.HK) as local firms expand DRAM and advanced logic capacity.

This focus on building a domestic supply chain echoes strategies seen in Malaysia, where chipmakers in Penang have rapidly expanded capacity to meet global demand, deepening their local ecosystem. However, the explicit goal of localization adds a geopolitical dimension to China's market growth, positioning it as both a major consumer and a developing producer in the high-stakes semiconductor race.

This article is for informational purposes only and does not constitute investment advice.