When Phison Electronics CEO Pua Khein-Seng publicly stated that “NAND production capacity for 2026 has already been fully booked,” the entire semiconductor supply chain was pushed into a new round of discussion. Around the same time, Silicon Motion’s General Manager, Wallace Kou, gave a similar conclusion. He believes that the current supply-demand gap for NAND flash is extremely large, with almost no room for relief within 2026, and that the market recovery may be delayed until the second half of 2027. These judgments, coming from two core companies in the NAND controller supply chain, point to the same reality: global flash memory is entering the tightest supply cycle in the past decade, and may even face a cross-year “super shortage.”
This phenomenon did not appear by accident. In the past few months, NAND contract prices have continued to rise, spot prices have surged in a short period of time, enterprise SSD delivery times have been forced to extend, and data center customers have started locking 2026 and 2027 orders in advance. All signs show that the market has reached a turning point where supply can no longer meet demand, and behind this is a complete supply chain restructuring from wafer fabs to cloud operators.
AI Data Center Expansion Drives Unprecedented NAND Consumption
The main driving force behind the widening NAND gap is the explosive growth of AI data centers. After generative AI entered large-scale training and inference, demand for storage capacity increased sharply. Model logs, feature vectors, index databases, and inference caches all grow at an exponential rate. Cloud providers must build more flexible infrastructure for training, inference, and cold data management. Traditional HDDs cannot meet requirements in power efficiency, throughput, and total cost of ownership, so the penetration of high-capacity SSDs has risen quickly. QLC NAND, once viewed as low-cost nearline storage, has now become a key component in PB-level storage systems for cloud companies.
Under this trend, hyperscale data centers no longer purchase only short-term deliveries but directly reserve a full year of upstream production capacity to ensure that AI services will not stall due to material shortages. The chain reaction of these bookings is obvious: once major customers lock in production capacity for the next two years, other small and medium-sized customers have difficulty obtaining stable supply, rapidly reducing the flexibility of the entire supply chain. This is the true meaning of “2026 production capacity is fully booked.”
Extended HDD Lead Times Accelerate the Shift Toward NAND
Another reason NAND demand continues to rise is the tight situation in the HDD supply chain itself. HDD production capacity has been shrinking in recent years, and delays in some key materials and manufacturing processes have extended HDD lead times to several months or even longer. After evaluating long-term risks, some major cloud providers have accelerated their shift to SSDs, especially in mixed hot-cold data applications that require high IOPS. This substitution effect has become more obvious.
As HDD uncertainty rises, enterprises are investing more budget into QLC SSDs or hybrid storage architectures to secure more reliable delivery. In other words, it is not only AI that is pushing NAND consumption higher—HDD “delayed supply” is also driving more demand toward NAND, further widening the supply-demand gap.
Upstream Expansion Constrained by Equipment, Materials, and Capital
In theory, when the market faces a supply-demand gap, manufacturers can invest more to expand production. But in the NAND industry, expansion is not as simple as “adding more machines” or “building another production line.” NAND is a highly complex, process-intensive product. From the start of a new fab to stable mass production usually takes 18–24 months or longer. Therefore, even if expansion starts now, new output cannot appear before 2026.
More importantly, NAND manufacturers’ capital spending has been held back by several factors. First, the strongest profit growth brought by AI is not in NAND but in HBM and DRAM, so many companies prioritize high-margin products. Second, key materials such as BT substrates and some packaging/testing processes are tight, meaning that even if producers want to expand, they cannot quickly complete all required steps. Third, after experiencing the long NAND price decline from 2018–2022, manufacturers have become more cautious and are unwilling to invest heavily again to avoid falling back into an oversupply cycle.
Together, these factors create a structural bottleneck: demand is growing strongly, but supply expansion is facing long-term constraints, creating a “supply ceiling” across the entire industry in 2026.
Why 2026 Cannot Return to Supply-Demand Balanceing Text Here
From a supply-chain perspective, every NAND wafer needs a fixed time to go through production, cutting, packaging, testing, integration, and finally shipment by SSD brands to OEMs. Once manufacturers allocate all wafer capacity for 2026, the room for adjustment becomes extremely limited. In other words, without large new production capacity, even if the economic environment changes or some demand slows down, the supply side cannot respond flexibly.
In addition, several supply-chain experts point out that most 2026 capacity is not only booked but locked through “long-term agreements,” which means any new demand must wait until after 2027. All these mechanisms lead to a clear conclusion: the gap is almost impossible to close in 2026.
2027 Emerges as the Potential Turning Point
Based on currently announced expansion plans, AI demand growth curves, and upstream and downstream industry assessments, 2027 is becoming a key point. Most companies believe new NAND production capacity must be gradually added in 2026 before the market can ease in the second half of 2027. At that time, if the growth of AI infrastructure slows from extremely fast to stable, and if the HDD supply chain gradually recovers, the market may enter a phase of “rebalanced supply and demand.”
However, there are also more pessimistic voices. If HBM profits remain far higher than NAND, manufacturers may delay NAND expansion, extending tight supply into 2028. If material shortages continue or geopolitical issues disrupt the supply chain, the balance point may be pushed back even further.
Industry-Wide Impact: From Fabs to Consumers
As the NAND shortage expands, the pressure structure of the supply chain is also changing. Wafer fabs and NAND manufacturers are now in an ideal situation with improved profitability and full loading, but controller companies and SSD brands face a more complex situation. They benefit from growing enterprise and high-end demand but also face weaker consumer-market demand and rising costs that compress profits.
For server makers and OEMs, tight supply means higher stocking costs and more complicated procurement planning. Companies must rely more on long-term agreements to ensure supply and adopt stricter inventory management and architecture optimization. For ordinary consumers, average SSD prices are almost impossible to drop significantly in 2026, and some capacities may even face short-term shortages in the DIY market.
A Structural Shock Reshaping the Industry’s Next Two Years
This round of NAND tightness is not only about rising prices—it is a long-term structural adjustment. The scaling of AI services is changing data-center architectures, and NAND is becoming an irreplaceable basic resource. During this process, the competitive focus of the storage industry is shifting from price to stable supply, technical efficiency, and whether companies can optimize multi-tier storage architectures.
More importantly, as tight capacity continues for the next two years, companies will be forced to upgrade or adjust their technical roadmaps, capital plans, and cooperation strategies. The year 2026 is not just a “price increase year,” but the key turning point before the storage industry enters its next cycle. Whether the market returns to balance in 2027 will determine the direction of the NAND industry for the next decade.
