The global surge in AI demand is wreaking havoc on the SSD market, sending prices upward and complicating supply chains. Phison, a major SSD controller maker, has joined NAND flash suppliers in requiring prepayments from customers-marking a clear sign that memory shortages are forcing upstream vendors to tighten cash flow and secure their material supplies amid soaring demand.
Phison’s business model bundles controllers with NAND flash for SSD manufacturing partners. But recent chip shortages have made it untenable to continue selling on traditional credit terms. Starting last month, Phison informed clients they must either prepay in full or opt for expedited payments to secure supply. The company claims this shift is necessary to improve procurement agility and maintain operational flexibility amid unprecedented market dynamics.
This new payment policy reflects the ripple effects of an AI-driven memory boom pushing Phison’s January revenue to a record $331 million-almost triple year-over-year growth. However, this impressive growth masks growing pressures on suppliers. NAND chipmakers like SanDisk have already mandated upfront payments, including multi-year preorders stretching as far out as 2028, a stark departure from the typical quarterly contracts.
SanDisk’s move to multi-year commitments aims to guarantee supply to server clients amid swelling demand predicted to jump between 25% and 60% this year. Meanwhile, Japanese supplier Kioxia forecasts a 26-fold surge in profit for the current quarter, fueled by its aggressive capital investment plans to expand AI memory production by 24%. But rising DRAM costs for in-house use mean Kioxia may soon shift higher expenses onto customers.
Phison’s requirement for prepayment highlights an overlooked stress point: not only NAND flash but also controllers are now bottlenecks in the SSD supply chain. As AI workloads continue to grow rapidly, these upstream suppliers are pushing financial risks upstream, likely inflating prices further and complicating inventory planning for manufacturers.
This trend isn’t likely to reverse soon. With server and data center expansion demanding vast quantities of memory, suppliers are scrambling to secure raw materials and stabilize cash flow. Companies hesitant to comply with prepayment policies may face supply delays or higher costs, putting smaller SSD makers at a disadvantage compared to large enterprises capable of locking in multi-year contracts.
In this evolving landscape, SSD buyers-from consumers to enterprise clients-should brace for sustained price pressure and potential scarcity. Phison’s shift is a canary in the coal mine illustrating how AI’s appetite for memory is reshaping supply chains beyond what was expected just a year ago. Whether the market adapts through increased production or alternative technologies remains to be seen, but Phison’s new policies make one thing clear: the SSD supply game is entering a more complex-and expensive-phase.