Why the flash crisis will last much longer this time

The industry is feeling the full weight of the current flash crisis. Prices are climbing at a pace not seen in years, shortages are becoming severe, and the gap between SSD and HDD costs is widening with no sign of stabilization.

Many expect this cycle to look like past fluctuations that were eventually corrected. But the underlying forces driving today’s flash market are very different, and they point to a much longer, more persistent disruption.

At the heart of the issue is a simple reality that separates two worlds: HDD production is an assembly business. Flash production is a semiconductor business.

That distinction determines how each industry reacts to spikes in demand, how it scales, and how long it takes for supply to catch up.

1. HDD: An assembly model that can expand quickly

Hard drives are built using traditional assembly lines. Their cost of the end product is driven by components such as motors, platters, casings, PCBs, and controllers.

While the engineering is sophisticated, the manufacturing model is flexible: vendors can respond to shifts in demand by adding staff, running additional shifts, expanding existing lines, or opening new lines with relatively modest investment.

As capital requirements are lower and predictable, HDD production can be scaled within a relatively short time and scaling it back when demand slows down is inexpensive.

This is why the HDD market rarely experiences true supply shortages. The industry has the ability to increase throughput without the need for massive infrastructure expansion.

2. Flash: A semiconductor model defined by high capital and long timelines

Flash pricing is not defined by the cost of NAND components. It is defined by the cost and output of semiconductor fabrication plants.

Fabs are among the most expensive manufacturing facilities on the planet, requiring complex infrastructure, extreme environmental controls, customized machinery, and multiyear construction timelines.

A fab is not an assembly line. It is a capital-intensive operation with enormous, fixed costs. Once built, it must run near full capacity to remain financially viable. It cannot simply pause production during market downturns or restart quickly when demand rises.

There is no alternative use for the facility and no simple path to incremental scaling.

Fabs resemble power plants. They must run constantly to justify their cost, and when demand shifts faster than capacity can adjust, the financial model breaks. This is why the flash industry experiences deep shortages while HDD does not.

3. The capacity ceiling creates a firm price floor

There is a hard limit on how much flash a fab can produce per week or month, and this limit creates a structural price floor. During the downturn two years ago, NAND prices fell below the cost of production.

Manufacturers absorbed enormous losses, and the industry made it clear that it could not sustain prices at that level again. Below a certain threshold, the fab economics collapses. Depreciation, equipment amortization, and operational expenses do not scale down when demand weakens.

This means that the industry now operates with a stronger price floor. When demand climbs, prices rise immediately because supply cannot meet demand.

When demand falls, any extra investment, if made, to satisfy peak demand, will be idle and accumulate losses (which is the reason why manufacturers are hesitant to make such investments). The swings are sharper and the recoveries slower.

4. Why lower interest rates will not fix the problem quickly

It is true that lower interest rates make it easier for manufacturers to finance new fabs. Cheaper capital reduces the financial burden of multibillion-dollar investments. However, this has almost no impact on the current crisis.

Even under ideal conditions, a new fab requires four to six years to build, followed by an additional year or more to reach full capacity. During that entire period, pricing remains elevated. Organizations continue paying premiums and adjusting strategies to work around limited supply.

Lower financing costs may accelerate long-term expansion, but they do not change the reality that new capacity cannot come online before 2028 or 2030 in most cases. The market must adapt without expecting short-term relief.

5. The flash shortage is structural, not cyclical

The industry is dealing with a structural imbalance. Demand is rising much faster than supply can scale, and the cost of growing supply is rising, not falling.

Construction costs for fabs continue to increase. Supply chains remain fragile. Manufacturers will not commit to new facilities without long-term demand guarantees, and even if a project were approved today, output is years away.

Flash cannot scale quickly. That is the core of the crisis, and it is why this cycle will last significantly longer than previous ones.

6. HDD will help stabilize the market, but only to a point

HDD manufacturers benefit from the current environment. Higher demand and stable component costs give them room to grow. HDD economics are far more predictable because the product is defined by physical components and assembly processes, not multibillion-dollar infrastructure.

But the market does not revolve around HDD pricing. Flash commands the global narrative because flash sits at the center of modern performance workloads. As long as flash supply remains constrained, overall storage economics remain under pressure.

Bottom line

The flash crisis is not a temporary spike driven by short-term market conditions. It is the result of structural limitations in semiconductor manufacturing, rising production costs, firm price floors, and capacity ceilings that cannot be expanded quickly.

Flash prices are not expected to return to the artificially low levels seen in 2022 and 2023. If anything, they are more likely to rise as demand driven by AI, cloud, and edge environments accelerates.

Organizations must plan for a future where flash remains expensive, scarce, and tightly constrained. The market will shift toward more efficient and balanced storage architectures because flash supply cannot keep pace with global data growth. The economics of the past are not coming back, and the industry must adapt accordingly.

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