Phison CEO says AI to drive 10-year NAND shortage

An insatiable appetite for data from artificial intelligence applications is creating a structural, decade-long shortage in the NAND flash memory market, according to the head of one of the industry's key suppliers. The situation is forcing a historic scramble to secure supply before a potential fourth-quarter crunch.

"I can't find a reason for an oversupply of storage," Phison Electronics Chief Executive Pua Khein-seng said in a recent interview. He argues the fundamental value equation in technology is shifting: "In the future, it's not 'He who has Tokens, has the world,' but 'He who has storage, has the world'."

The market signals align with Pua's warning. NAND flash prices have nearly doubled since January, with Morgan Stanley forecasting a full-year price increase of over 200 percent for 2026. To cope, Phison, a key supplier of flash controllers, has launched a $1.18 billion fundraising plan to secure inventory, as it can currently only meet about 30 percent of its customer demand.

This impending shortage threatens to significantly raise costs for PC makers and data center operators, while providing a major tailwind for NAND producers like Samsung and SK Hynix. The bottleneck in storage could ultimately slow the hardware rollout required to power the global AI boom, creating a new class of winners and losers in the tech supply chain.

Fundraising to Avert a 'Can't-Buy' Scenario

To avoid a situation where "you can't buy components even if you have money," Phison is executing a historic capital raise of approximately NT$43 billion ($1.18 billion). The plan includes an $800 million overseas convertible bond, a NT$6 billion domestic convertible bond, and a NT$12 billion syndicated loan. This capital is designated entirely for locking in wafer and memory chip supply.

Pua said the company is facing a 70 percent shortfall in its ability to meet orders. He described urgent requests from major PC manufacturers for an additional one million SSDs and frequent, un-forecasted orders from American clients. The pressure is expected to intensify with the upcoming launch of Nvidia's next-generation Rubin AI platform, which Pua predicts will instantly absorb available factory capacity.

Why Cost-Saving Tech Could Worsen the Shortage

Counterintuitively, recent technological advancements designed to reduce memory usage may actually exacerbate the storage crisis. Pua pointed to a Google paper on compressing KV Caches by a factor of eight. While this dramatically lowers the memory and storage cost for a single AI server, it also makes the technology accessible to a much wider audience.

"The machine that generates AI data becomes cheaper, so data is generated faster, and the subsequent storage shortage could be even more severe," Pua explained. He compared it to the auto industry: if only Ferrari existed, gasoline consumption would be limited. But when Toyota makes cars affordable for everyone, gasoline becomes scarce. Technologies like Phison's own aiDAPTIV+, which uses flash to supplement more expensive DRAM, follow the same logic by lowering the barrier to entry for AI deployment and thus increasing total data generation.

Consumer Market Feels the Squeeze

The most immediate impact of the NAND shortage will be felt in the consumer electronics market, which Pua called the "biggest victim." He warned that mainstream laptop models in the second half of the year may revert to smaller 256GB storage capacities to manage costs.

However, this does not mean total demand will fall. Pua predicts that 20 to 30 percent of consumers who buy these lower-spec machines will be forced to upgrade their storage in the aftermarket, causing demand to flow into the retail channel at higher prices. "It's a necessity," he said, comparing it to buying gasoline even if the price doubles. "If you need to leave the house, you still have to refuel."

The dynamic is already shifting Phison's business, with its consumer revenue dropping to just 5-6 percent of its total, while enterprise and industrial applications, which are "very out of stock," become the absolute majority. The company's 2025 revenue grew 23.3 percent year-over-year to NT$72.66 billion, reflecting this high-demand environment.

The long-term outlook suggests a fundamental change for the memory industry, shifting it from a traditionally cyclical market to one of sustained, structural growth. For investors, this indicates that value lies not just with the creators of AI models, but with the companies that provide the foundational infrastructure. This includes wafer fabs, memory giants like Samsung and SK Hynix, and crucial controller makers like Phison that enable the world to store the massive amounts of data the AI revolution will generate.

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