Core Viewpoint - The storage industry leader, Baiwei Storage, has shown strong interest from over a hundred institutions during its recent investor relations activities, indicating a positive outlook for the company and the industry as a whole [1] Industry Overview - The storage industry is experiencing a price recovery, with companies like SanDisk, Longsys, and Micron issuing price increase notices for their products. The supply-demand imbalance in NAND has significantly improved due to production cuts and inventory reduction [1] - In the DRAM sector, major players like Samsung, Micron, and Hynix are focusing on high-end products, leading to a reduction in supply for DDR4 and Mobile LPDDR4X, resulting in a supply shortage and price increases [1] - The overall market sentiment remains positive, supported by seasonal demand and emerging applications such as AI glasses [1] Company Performance - Baiwei Storage reported a revenue of 3.912 billion yuan for the first half of 2025, marking a year-on-year increase of 13.7% and a quarter-on-quarter growth of 53.5% in Q2. The sales gross margin increased by 11.7 percentage points in Q2, reaching 18.61% in June [2] - The company's performance is attributed to its expansion among leading domestic and international clients across various sectors, including mobile, PC, enterprise, and smart wearables [3] Client Base and Market Position - In the mobile sector, Baiwei's embedded storage products are utilized by major clients such as OPPO, vivo, and Motorola. In the PC sector, its SSD products are supplied to Lenovo, Xiaomi, and HP [3] - The company is a key supplier in the domestic PC market and is rapidly growing in the enterprise sector, having secured core supplier qualifications from AI server manufacturers and leading internet companies [3] - In the smart automotive sector, Baiwei has delivered LPDDR and eMMC products to major automotive manufacturers, enhancing its product offerings for various applications [3] AI and Product Development - Baiwei Storage has a strong competitive edge in AI edge storage, with self-developed main control chips and firmware algorithms. The company expects over 1 billion yuan in revenue from AI emerging sectors in 2024, a year-on-year growth of approximately 294% [4] - The first domestically developed eMMC main control chip (SP1800) has been successfully mass-produced, with plans for a UFS main control chip (SP9300) to enhance competitiveness in high-end storage solutions [4] Advanced Packaging Capabilities - The company is advancing its wafer-level packaging capabilities, with construction completed for its manufacturing facility, set to begin production in the second half of 2025. This will enhance its offerings in integrated storage and computing solutions [5] - Baiwei has developed various advanced packaging technologies, enabling it to meet the growing demand for large-capacity storage solutions in AI, smart driving, and server applications [5] Future Outlook - With the recent price increases in storage and the growth in AI edge applications, Baiwei Storage's performance is expected to improve. Analysts predict significant net profit growth rates of 193.22%, 55.61%, and 33.56% for the years 2023, 2024, and 2027, respectively [5]

Investment Rating - The report maintains a positive investment outlook for the storage industry, highlighting potential recovery and growth opportunities in various segments [2]. Core Insights - The storage industry is experiencing a significant divergence in performance across different segments, with high-end storage products showing resilience while consumer products have reached cyclical lows [6][11]. - The supply-demand dynamics are improving due to targeted production cuts by manufacturers, leading to potential price inflection points for certain NAND products [6][40]. - High-end storage demand remains robust, with domestic manufacturers accelerating the pace of domestic substitution in the high-end storage sector [6][52]. - The trend of increasing storage capacity in edge devices is solidifying, driven by the integration of AI models into consumer electronics [6][52]. Summary by Sections 1. Industry Performance Divergence - The storage industry exhibits strong cyclicality, with high-end storage demand and prices on the rise, while consumer storage prices are under pressure [11][12]. - NAND prices have been particularly weak compared to DRAM, with some products reaching cyclical lows [14][22]. 2. Supply-Demand Dynamics - Targeted production cuts by major manufacturers are leading to an improved supply-demand balance, with some NAND products nearing price recovery [6][40]. - Inventory levels are approaching healthy thresholds as manufacturers actively reduce stock [44]. 3. High-End Storage and Domestic Substitution - Capital expenditures from major cloud service providers are expected to drive continued growth in high-end storage demand, particularly for HBM and eSSD products [52][53]. - Domestic manufacturers are making significant strides in high-end storage technology, with products that rival those of international competitors [57][58]. 4. Edge Storage Expansion and Innovation - The integration of AI into consumer devices is driving increased storage capacity requirements, with notable growth in DRAM capacities for AI-enabled smartphones and PCs [6][52]. - Innovations such as integrated storage solutions are emerging to meet the demands of edge computing [7]. 5. Investment Recommendations - The report suggests focusing on companies benefiting from the recovery in consumer storage, advancements in high-end storage, and innovations in edge storage solutions [8]. - Specific companies to watch include Jiangbolong, Baiwei Storage, and Demingli among storage module manufacturers, and Zhaoyi Innovation and Puran among niche storage chip manufacturers [8].

Group 1 - The storage industry is experiencing significant differentiation across various segments, with high-end storage prices performing well while consumer product prices have dropped to cyclical lows [2][10] - The overall supply-demand balance is improving due to targeted production cuts by original manufacturers, leading to a potential price turning point for certain NAND products [3][20] - High-end storage demand remains strong, and the domestic replacement process is accelerating, with major manufacturers focusing on expanding HBM and eSSD production [4][28] Group 2 - The trend of storage expansion at the edge is confirmed, driven by the increasing penetration of AI in consumer products, leading to higher storage capacity requirements [5][36] - The integration of computing and storage is advancing, addressing the limitations of traditional architectures and enhancing innovation in storage solutions [6][38] - Investment recommendations for 2025 focus on companies benefiting from the recovery of consumer storage, breakthroughs in domestic high-end storage, and innovations in edge storage solutions [6][24] Group 3 - The capital expenditure guidance from major cloud service providers indicates robust growth in high-end storage demand, particularly for HBM and eSSD products [25][26] - Domestic storage manufacturers are rapidly catching up in high-end storage technology, with significant advancements in products like LPDDR5 and PCIe 5.0 SSDs [28][29] - The tightening of U.S. export controls is expected to accelerate the domestic replacement process in the storage industry, impacting both manufacturers and supply chains [31][32]