October 6, 2025 08:00 PM GMT Greater China Semiconductor | Asia Pacific Old Memory Could Last for a Longer Time Along with stronger mainstream memory, we see stronger pricing upside for DDR4&3 in 4Q and more signs of pricing sustainability for legacy NAND and NOR going into 2026. It is time to look at peak valuations. We revise up price targets and reiterate our Top Pick Winbond. Key Takeaways Never too late on mainstream memory: Our US analyst Joe Moore upgraded Micron to OW (link), stating it's not too la ...

Core Thesis - Micron Technology, Inc. is positioned to benefit from a memory upcycle and an increase in AI spending, potentially leading to significant profit growth with minor adjustments in pricing and product mix [2][3] Financial Performance - FY24 revenue is expected to rebound nearly 50% year-over-year to between $27 billion and $28 billion, with gross margins recovering to the low 40s and positive operating cash flow as inventory normalizes [2][4] - Forward guidance indicates continued revenue growth towards $40 billion by FY26, with potential EPS exceeding $12 if margins remain in the mid-40s [4] Strategic Focus - The company is concentrating on high-bandwidth memory (HBM), particularly the ramp-up of 12-high HBM3E, to meet the increasing demand for AI-driven servers [3] - A disciplined capital expenditure strategy is in place to maintain leadership in HBM and advanced DRAM technologies [3] Balance Sheet Strength - Micron's balance sheet shows resilience with approximately $10 billion to $11 billion in cash and investments against $6 billion to $7 billion in debt, and equity exceeding $45 billion [4] Market Sentiment and Technical Analysis - The stock is currently in a bullish trend, with technical indicators suggesting strong momentum, although overbought conditions may lead to potential pullbacks [5] - A pivotal after-hours report is anticipated, with expectations for a clear beat-and-raise scenario to drive the stock price towards $179–205 [5] Long-term Investment Strategy - For medium- to long-term investors, the recommendation is to capitalize on the trend, buy on dips, and allow HBM mix and pricing to drive sustainable free cash flow and compounding upside [6] Historical Context - A previous bullish thesis highlighted strong revenue growth and technological advantages in AI memory, with the stock appreciating approximately 123% since coverage, indicating ongoing confidence in the company's prospects [7]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the memory semiconductor industry, particularly DRAM and NAND sectors, with a positive outlook on memory pricing and demand driven by AI and server applications [2][3][8]. Core Insights 1. **Memory Price Outlook**: - Upgrades in memory-price outlook for commodity DRAM and NAND have led to increased target prices for SK Hynix (from KRW 390k to KRW 440k) and Samsung (from KRW 88k to KRW 105k) [2]. - Anticipated server-driven DRAM price hikes are expected to persist into the first half of 2026 due to increased demand from AI processing and reduced inventory levels at DRAM and server OEM makers [2][3]. 2. **Capex Growth**: - Capital expenditures (capex) for chipmakers are projected to rise by 9% in 2025 and 8% in 2026, indicating a robust growth cycle amid shortages in commodity DRAM and NAND [2][4]. - Domestic semiconductor capex is expected to increase by 17% in 2025 and 8% in 2026, benefiting equipment suppliers [4][8]. 3. **NAND Market Dynamics**: - The demand for NAND is expected to grow due to generative AI and high-density HDD shortages, leading to a stronger NAND price trend extending to 2026 [3]. - The eSSD market is projected to grow significantly, reaching 35-40% of total NAND in the next 2-3 years, up from approximately 20% last year [3]. 4. **Preferred Stocks**: - SK Hynix is identified as the preferred memory stock due to its leadership in HBM (High Bandwidth Memory), with a projected sales contribution of 56% in 2026 compared to 31% in 2024 [5]. - EOT is highlighted as a key equipment supplier, with expectations for Samsung to narrow the supply gap in HBM4 by the first half of 2026 [5]. Financial Projections 1. **Revenue and Operating Profit Estimates**: - Revenue estimates for SK Hynix are raised to KRW 89,677 billion for 2025 and KRW 108,758 billion for 2026, with operating profit estimates increasing by 4% in 2025, 9% in 2026, and 24% in 2027 [57][69]. - DRAM revenue is projected to be KRW 70,198 billion in 2025 and KRW 84,033 billion in 2026, while NAND revenue is expected to reach KRW 19,479 billion in 2025 and KRW 24,725 billion in 2026 [57]. 2. **Target Prices and Ratings**: - Target prices for SK Hynix and Samsung have been raised, with SK Hynix now at KRW 440,000 and Samsung at KRW 105,000, both rated as "Buy" [2][69]. Risks and Considerations - Potential risks include KRW appreciation, global trade restrictions, and economic slowdowns that could impact consumer and enterprise IT demand [70]. Additional Insights - The conference highlighted the ongoing production issues at DRAM manufacturers and Chinese producers, which are expected to limit output growth and capacity expansion [2]. - The report emphasizes the importance of the AI sector in driving demand for memory products, particularly in server applications [8]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the memory semiconductor industry.