A Futurum analyst says the memory technology lead of SKHY, Micron (MU) and Samsung over China's CXMT is unlikely to narrow soon.

During an interview with CNBC, Futurum Head of Semiconductor & Infrastructure Equity Research Rolf Bulk said that SK Hynix Inc. (SKHY), Micron Technology Inc. (MU), and Samsung Electronics (SSNLF) have an advantage of about two to three generations over Chinese memory manufacturer ChangXin Memory Technologies (CXMT). He cited the performance edge these three companies hold over CXMT's chips.

Bulk highlighted that CXMT also incurs higher manufacturing costs than its rivals. "CXMT is still two to three generations behind SK Hynix, Samsung, and Micron when it comes to the performance of their chips. So for every chip they produce, they have to spend 20% to 30% more on a cost per bit basis," he said.

He believes CXMT is unlikely to catch up with the three incumbents anytime soon due to constraints in building out its fabrication facilities and procuring tools from companies like ASML Holding (ASML). Even so, Bulk said the supply and demand imbalance is so severe that CXMT's profitability and demand remain strong. "They will probably do revenues of $50 billion this year and gross margins of around 70% with chips lagging a few generations compared to the incumbents," Bulk added.

Bulk also said that Apple Inc.'s (AAPL) attempt to diversify its memory supply beyond SK Hynix, Micron, and Samsung is "understandable" as the iPhone maker tries to negotiate prices down amid the ongoing supply crunch. He noted that Apple had previously tried to add Chinese memory manufacturer Yangtze Memory Technologies (YMTC) to its list of vendors for iPhones sold in China. "However, it is a real security concern in Washington, and I think that the chances of Apple adopting CXMT and YMTC remain fairly low," Bulk said.

Bulk said long-term agreements will provide better earnings visibility for memory chip makers going forward, as companies like Micron and now SK Hynix focus on these deals to lock in revenue and margins. "We're moving from a market that is almost entirely driven by cyclicality, to a market where around half of revenue is locked in through these long-term supply agreements at gross margins of 50% to 60%," he added.

According to Bulk, these deals create a very different investment setup for companies in the sector compared with the earlier thesis of playing the boom-and-bust cycles in the memory industry. He added that earnings visibility across the sector is already "improving materially."

The Futurum analyst also said that while memory chip makers may have approached "peak profitability," he does not expect current gross margins to nosedive. "However, given the supply constraints that we continue to see and the very strong demand driven by AI, which is also sustainable in our perspective, we don't expect margins to collapse from here," he said.

Bulk believes gross margins for memory chip manufacturers could increase slightly from current levels through the end of this year, then stabilize around 70% to 75% before gradually declining over the next decade.