In the first half of the year, the dominant theme across the computing power supply chain was price increases. HBM consumed advanced DRAM capacity, tightening storage supply and demand. This price surge spread from memory to copper-clad laminates, electronic fabrics, and passive components, unleashing the earnings elasticity of the entire supply chain.
However, entering July, this logic faced a stress test. The South Korean memory sector was the first to come under pressure, with adjustments rippling outward along the supply chain. In a research report released on July 31, analysts from China Securities Co., Ltd. noted that this adjustment was not a complete reversal of the AI demand logic, but a structural risk release originating from the South Korean memory sector.
So, has the core logic of computing power fundamentally changed? The analysts write: As price-sensitive assets like memory undergo deleveraging and risk repricing, the market is beginning to reassess the sustainability of the price increase slope and high-profit margins. We believe that the second half of 2026 will not be a complete shift from price increases to volume growth, but rather a scenario where price increases continue, the slope may marginally slow, and market pricing will gradually increase its focus on the realization of orders, capacity, and delivery.
Six Months of Price Increases: From Memory to the Entire Supply Chain
How high was the boom in the computing power supply chain in the first half of 2026? Look at the demand side first. According to company financial reports, the combined capital expenditure of the four major cloud providers, Meta, Alphabet, Amazon, and Microsoft, reached $130.6 billion in Q1 2026, an increase of approximately 84% year-on-year, significantly higher than the growth rates seen in each quarter of 2025. Over two years, the single-quarter capital expenditure of these four cloud providers has grown by about 180%.
More notably, these cloud providers are continuously revising their full-year plans upward. Alphabet has gradually raised its 2026 capital expenditure guidance from an initial $175-185 billion to $195-205 billion. Meta's guidance midpoint has been raised by 8% to $125-145 billion. Based on the latest guidance midpoints, the combined total for the four companies is approximately $725 billion, an increase of about $30 billion from the beginning of the year.
Demand was robust, but a structural bottleneck emerged on the supply side. Rapid growth in HBM demand led memory manufacturers to allocate more advanced process capacity to HBM and server memory, squeezing the effective supply of general DRAM and NAND. With supply and demand tightening, prices accelerated their rise. Earnings data directly illustrates the issue: From Q1 2025 to Q1 2026, Micron Technology's gross margin rose from 38.44% to 56.04%, SK Hynix from 57% to 79%, and Samsung Electronics from 35.5% to 61.2%. Micron's gross margin further increased to 74.41% in Q2 2026.
Price increases then spread to upstream materials. Kingboard Laminates implemented multiple rounds of price increases from December 2025 to July 2026, with single increases ranging from 10% to 20%. Resonac raised prices for high-end CCL and adhesive films by over 30%. Taiwan Union Technology saw price increases of 20% to 40% for some CCL products. The price of standard 7628 electronic fabric rose by approximately 54% compared to Q4 2025. In March 2026, the import price of CCL in South Korea reached $20,728 per ton, a year-on-year increase of 74.5%.
These price increases have already translated into tangible performance. In Q1 2026, Wus Printed Circuit (Kunshan) Co., Ltd. saw revenue growth of 53.91% year-on-year, Shennan Circuits Co., Ltd. grew by 37.90%, and TTM Technologies grew by 30.42%. For the packaging substrate company Nanya PCB, the gross margin improved from 5.09% in Q1 2025 to 15.85%.
The Deleveraging Shock: Triggers and Transmission Paths
In July, the South Korean memory sector began to experience violent fluctuations. SK Hynix fell 47.13% for the month, Samsung Electronics dropped 37.57%, Murata Manufacturing declined 46.44%, Taiyo Yuden fell 56.11%, and Kingboard Laminates plummeted by 65.97%.
Why did the volatility erupt in South Korea first? The China Securities Co., Ltd. research report points out that South Korean individual investors not only buy stocks using credit loans and broker financing but also widely participate in leveraged ETFs for individual stocks like Samsung Electronics and SK Hynix, forming a leveraged structure of overlapping over-the-counter borrowing, margin trading, and leveraged products. The danger of this structure lies in the fact that the combined weight of SK Hynix and Samsung Electronics in the KOSPI rose from about one-third in early March 2026 to approximately 60% on June 29, a record high. These two companies contributed roughly 70% of the KOSPI's gains in 2026. The higher the weight, the more passive selling is triggered during a decline, amplifying the negative feedback loop.
The adjustment transmitted along two paths. The first was within the memory supply chain itself, where leading South Korean companies drove synchronous adjustments in US, Japanese, and Chinese memory-related assets. The second path spread to upstream computing power sectors that had seen significant gains and concentrated holdings, such as optical modules, PCBs, and semiconductor equipment. Technology midstream and downstream sectors and internet platform companies remained relatively stable. The analysts' judgment is that the clearance of valuations and leverage constitutes the direct cause of this round of adjustment, while the unique holding and trading structure of the South Korean market significantly amplified the market volatility.
But deleveraging is just a trigger. The deeper cause is the market beginning to reprice the sustainability of the price increases. The analysts point out that the market is no longer simply extrapolating continuous upward trends in product prices and profitability. Instead, it is paying more attention to whether price increases can persist after supply is released, and whether high profit margins can be maintained.
Shift in Memory Manufacturer Strategy
Just as the market debated whether price increases could continue, management at memory manufacturers began to take the initiative. This is a key signal. Citing a report, the analysts noted that the Chairman of SK Group explicitly stated that current AI semiconductor prices are at an abnormally high level. He suggested that continuous price increases could trigger chip inflation and compress the downstream market, and therefore, even if it means reducing profit margins, it is necessary to stabilize prices by expanding production scale and increasing supply.
What does this statement imply? The operational goals of memory manufacturers are shifting from emphasizing supply discipline and short-term profit margins to stabilizing prices, signing long-term agreements, expanding capacity, and increasing long-term sales volume. Actions are also following. SK Hynix has established a multi-year partnership with Nvidia covering the joint development and supply support for next-generation AI memory. SK Group signed a letter of intent with Nvidia for over $500 billion in AI infrastructure cooperation, including long-term AI memory supply. Samsung reached a cooperation framework with Broadcom for the next five years covering memory, foundry, and advanced packaging. Micron had signed 16 strategic customer agreements as of FY2026 Q3, most with binding take-or-pay mechanisms.
Capital expenditure is being revised upwards in tandem. SK Hynix stated that its 2026 investment scale will grow significantly year-on-year and plans to double its wafer capacity over the next five years. Micron has continuously raised its FY2026 capital expenditure from an initial approximately $18 billion to around $27 billion. However, the release of new capacity takes time. The construction of wafer fabs and advanced packaging production lines involves equipment delivery, customer qualification, yield improvement, and capacity ramp-up. The research report judges that the second half of the year is more likely to present a combination of prices still having support, a slowing slope of price increases, and the gradual progression of capacity expansion, rather than a rapid loosening of short-term supply or a swift price decline.
Second Half of the Year: Logic Rearrangement, What to Watch
The analysts believe that the second half of 2026 is not about the disappearance of the price increase logic, but a rebalancing of the relative weight between price elasticity and volume realization. Specifically, there are two volume growth paths worth paying close attention to. The first is the marginal easing of procurement pressure for cloud providers. If the slope of price increases for key components like memory slows, the same capital expenditure can buy more GPUs, servers, network equipment, and supporting infrastructure. Beneficiaries include GPUs and AI ASICs, high-speed optical modules, AI switches, high-end PCBs, and power supply and liquid cooling systems. The revenue growth of these segments relies more on project construction and product delivery rather than price elasticity. The second path is the expansion of upstream suppliers driving demand for equipment and materials. TSMC raised its 2026 capital expenditure guidance midpoint from $54 billion to $62 billion, with 80% allocated to advanced processes and 20% to advanced packaging, testing, and mask manufacturing. The expansion by wafer foundry, HBM, and advanced packaging manufacturers will directly drive demand for semiconductor equipment, components, and materials.
The overseas allocation priority given by the analysts is: advanced packaging, testing, and core equipment (TSMC, Advantest, Teradyne); optical communication, switching networks, and high-speed connectivity (Lumentum, Broadcom, Arista); power, distribution, and liquid cooling (Vertiv, GE Vernova); server ODMs, high-end PCBs, and connectors; GPUs and AI ASICs; and memory manufacturers.
For domestic markets, there are two main themes. The first is companies entering the global AI supply chain, such as optical modules, high-end PCBs, and high-speed copper connections, which directly take on demand from overseas cloud providers. The second is domestic semiconductor equipment companies, benefiting from the expansion of domestic wafer manufacturing, memory, and advanced packaging, coupled with an increase in domestic market share. For segments purely driven by price increases, such as general CCL, MLCC, and memory modules, the analysts caution that early gains came more from price and inventory elasticity. The subsequent need is to verify the real demand absorption and profit sustainability, placing their priority relatively lower on the watchlist.