Global Memory Tech Top-5 checkpoints for 2026 memory super- cycle and stock ideas Price Objective Change 1. 2026 super-cycle: similar to 1990s, DRAM sales up 51% Global memory sales are expected to hit new highs in 2026 (DRAM US$196bn, +51% YoY; NAND US$114bn, +45%) even after 2024-25 upturn. ASP hike (DRAM +33% YoY / NAND +26%) should be the key contributor rather than bit growth (+14% / +15%). We also assume 10%+ sales growth in 2027. This is an exceptionally longer upturn due to AI and similar to 1992-95 ...

Core Viewpoint - Morgan Stanley believes that Samsung is regaining dominance in the memory market with its "technology-first" strategy, projecting a more than 150% increase in earnings per share from 2025 to 2026 [3][5]. Group 1: High Bandwidth Memory (HBM) Developments - Samsung has achieved significant progress in the High Bandwidth Memory (HBM) sector, with HBM4 products undergoing multiple qualification tests, and initial results expected in early December [3]. - The company currently has an effective DRAM capacity of 500,000 wafers, significantly surpassing its competitors [3][5]. - Samsung's unique advantages in high-speed (>11 Gbps) and end-to-end solutions from DRAM to packaging are expected to enhance its market share [3]. Group 2: DRAM Market Dynamics - The DRAM order fulfillment rate has dropped to around 70% of customer demand, indicating a continued visibility into the first half of 2026 [3]. - Samsung's management is adopting a more rational strategy, focusing on sustainable profitability through collaboration with key customers rather than chasing market trends [3]. Group 3: NAND Pricing Forecasts - NAND contract pricing is expected to increase significantly, with forecasts indicating a rise of 25-30% for enterprise SSDs in Q4 2025 and a gradual decrease in growth rates into 2026 [4]. Group 4: Foundry Business Recovery - Samsung's foundry business is showing signs of recovery, with improved utilization rates and advanced process performance driving profitability [5]. - The company has secured multiple orders in the 2nm process area, indicating a positive shift in its customer-centric culture [5]. - Morgan Stanley projects Samsung's earnings per share to reach 14,464 KRW in 2026, nearly 50% higher than current market consensus [5].

Core Viewpoint - Morgan Stanley believes that Samsung Electronics is regaining dominance in the memory market with its "technology-first" strategy, projecting a more than 150% increase in earnings per share from 2025 to 2026 [1] Group 1: Market Position and Strategy - Samsung has achieved comprehensive catch-up in the High Bandwidth Memory (HBM) sector, with HBM3e products already shipped to all AI computing customers, and HBM4 products undergoing multiple qualification tests [1] - Unlike competitors, Samsung does not need to modify design requirements, maintaining a leading edge in product quality and specifications due to its 1c DDR5 front-end technology and 4nm logic base die [1] - Samsung's unique advantage in the high-speed 11 Gbps sector and its end-to-end solution capabilities from DRAM to foundry to packaging are expected to significantly enhance its market share [1] Group 2: Production Capacity and Demand - Samsung currently possesses an effective DRAM production capacity of 500,000 wafers per month, far exceeding competitors, with total capacity around 650,000 wafers per month [1] - The DRAM order fulfillment rate has dropped to about 70% of customer demand, indicating visibility extending into the first half of 2026 [1] - Samsung's management has adopted a more rational strategy, focusing on sustainable profitability through collaboration with key customers based on actual demand [1] Group 3: Financial Projections - Morgan Stanley projects Samsung's earnings per share to reach 14,464 KRW in 2026, nearly 50% higher than the current market consensus of 9,800 KRW [4] - The anticipated earnings growth is expected to improve the price-to-earnings ratio multiples [4] - The market may be unprepared for specific positive developments at Samsung, which could act as catalysts for stock price increases [4]

Summary of the Conference Call on Greater China Semiconductors Industry Overview - **Industry**: Greater China Semiconductors - **Current View**: Attractive [6][9] Key Company Insights - **Company Mentioned**: CXMT (ChangXin Memory Technologies) - Plans to increase capacity for DDR4/LPDDR4 and accelerate DDR5/LPDDR5 supply to alleviate shortages in 2-3 months [1] - Analysts express skepticism about CXMT switching back to DDR4/LPDDR4 due to required changes in circuit design and smaller total addressable market (TAM) compared to DDR5 [2] - CXMT is expected to increase capacity by 10-20 kilowatts per month (kwpm) next year, focusing on advanced products like HBM3e or DDR5, but ramp-up will take time [2] Market Sentiment - Despite market volatility, analysts remain bullish on old memory players, reiterating a top pick on Winbond Electronics Corp [3] Valuation Methodology - **Winbond Electronics Corp**: - Base case valuation at 3.0x 2026 estimated price-to-book (P/B) ratio, reflecting the industry's high volatility [9] - Analysts believe the stock deserves a multiple beyond its historical range of 0.5x-1.5x since 2017 due to strong DRAM pricing and sustainable NOR price increases [9] Risks Identified - **Upside Risks**: - Increase in NOR Flash pricing driven by stronger-than-expected demand [11] - Stronger-than-expected DRAM pricing due to ongoing supply shortages [11] - Faster-than-expected development of SLC NAND [11] - **Downside Risks**: - NOR Flash downcycle due to weaker demand [11] - Lower-than-expected DRAM pricing due to oversupply [11] - Slower-than-expected SLC NAND development [11] Analyst Team - **Analysts Involved**: - Daniel Yen, CFA - Charlie Chan - Daisy Dai, CFA - Tiffany Yeh - Ethan Jia [5] Important Disclosures - Morgan Stanley may have conflicts of interest due to business relationships with companies covered in the research [6][4] - The report includes various regulatory disclosures and compliance information relevant to the companies mentioned [4][12] Conclusion - The Greater China semiconductor industry is currently viewed as attractive, with specific focus on CXMT's capacity expansion and Winbond's strong market position. Analysts are cautious yet optimistic about the potential for pricing increases in the memory sector, while also highlighting significant risks that could impact market dynamics.

Core Insights - Memory prices have increased by 50% this year, with expectations of a further 30% rise by Q4 2025 and an additional 20% increase early next year [1] - The supply of traditional LPDDR4 is tightening, driven by strong demand from AI applications, particularly from Nvidia, which is impacting the entire consumer electronics market [1][2] - The current shortage primarily affects low-end smartphones, with potential ripple effects across the smartphone and consumer electronics ecosystem [5] Group 1: Market Dynamics - The shift in production capacity towards higher-end processes is disrupting the overall market structure, leading to price inversion in the spot market [1] - DDR5 prices are expected to double from Q1 2025 to the end of 2026 due to extreme supply constraints [3] - The transition of Nvidia to LPDDR for lower power consumption is creating significant demand that the supply chain struggles to accommodate [2] Group 2: Impact on Manufacturers - The BOM costs for smartphones are rising significantly, with some models experiencing increases of up to 15%, which could compress profit margins and hinder growth [5] - Major chip manufacturers are expected to increase DRAM production by over 20% by 2026, with companies like Samsung and SK Hynix adjusting their production strategies [2] - Macroeconomic risks, including tariffs and geopolitical factors, are adding to the uncertainty in the industry, forcing suppliers and manufacturers to navigate difficult trade-offs [5]

Core Insights - The article discusses the significant impact of chip shortages on memory prices, predicting a further increase of approximately 50% by Q2 2026, particularly affecting traditional LPDDR4 [4][5] - Counterpoint Research highlights that memory prices have already risen by 50% this year, with expectations of an additional 30% increase by Q4 2025 and around 20% early next year [5] - The shift in demand towards advanced memory solutions, particularly due to Nvidia's increased need for LPDDR, poses broader risks to the consumer electronics market [5][6] Memory Price Trends - The current market shows a price inversion where DDR5 is trading at approximately $1.50 per Gb, while older DDR4 is priced at $2.10 per Gb, exceeding the $1.70 for advanced HBM3e [5] - Counterpoint forecasts a more than 20% increase in DRAM production from major chip manufacturers by 2026 [6] Advanced Memory Risks - The article emphasizes that the real risk lies in advanced memory, as Nvidia's transition to LPDDR has created a demand comparable to that of large smartphone manufacturers, straining the supply chain [6] - The expected price increase for DDR5 64GB RDIMM DRAM modules is projected to double between Q1 2025 and the end of 2026 due to supply constraints [6] Impact on Smartphone Market - The shortage primarily affects mid to low-end smartphone markets, with potential ripple effects across the entire smartphone and consumer electronics ecosystem [9] - The bill of materials (BOM) costs for smartphones are expected to rise significantly, with some models seeing increases of up to 15%, which could compress profit margins and hinder growth [10] Macro Risks - The industry faces dual pressures from limited capacity and soaring prices, compounded by macro risks such as tariffs, geopolitical tensions, and employment trends, leading to increased uncertainty [10]

Summary of Key Points from Conference Call Records Industry Overview - The conference call primarily discusses the global memory technology industry, focusing on key players such as Samsung Electronics (SEC) and SK Hynix, along with other companies like Hanmi Semi and LG Electronics (LGE) [1][2][3]. Core Insights and Arguments 1. **Earnings Momentum Comparison**: - SK Hynix is expected to have stronger near-term earnings momentum compared to Samsung Electronics due to confirmed mass production of HBM4 and larger operating profit in Q3 [1]. - Hynix reported a Q3 memory operating profit of over W11 trillion with a DRAM operating profit margin (OPM) of 60%, while Samsung's was below W8 trillion with a DRAM OPM of 37% [1]. 2. **Market Share and Growth**: - Samsung's HBM bit growth was weaker than expected, with only an 85% quarter-over-quarter increase in Q3, compared to a forecast of 100% [1]. - Hynix holds a global market share of over 60% in HBM, while Samsung's share remains at 20% [1]. 3. **Price Trends**: - The average selling price (ASP) for conventional DRAM is expected to increase by 21% quarter-over-quarter in Q4, while HBM prices are projected to decline by 1% [1]. - A notable rally in DRAM spot prices was observed, with increases of over 20% for 16Gb DDR4 and DDR5 products [2]. 4. **Sales Volume Concerns**: - Both Hynix and Samsung acknowledged below-trend sales volumes, with Samsung projecting low single-digit percentage growth for DRAM and a 10% decline for NAND in Q4 2025 [2]. 5. **Revisions in Earnings Forecasts**: - The global memory industry model has been revised to reflect a 5% increase in 2026 DRAM and NAND sales due to stronger price assumptions [2][9]. - Hanmi Semi reported weaker-than-expected Q3 sales and operating profit, leading to a price objective cut based on lower earnings expectations [3]. 6. **Future Projections**: - Global DRAM sales are expected to grow by 46% year-over-year in 2025, driven by Hynix's HBM, while NAND sales are projected to remain flat in 2025 but recover strongly in 2026 with a 28% increase [8]. - The forecast for 2026-2027 indicates continued growth in both DRAM and NAND sales, with expectations of 10-30% year-over-year growth [8]. Additional Important Insights - **Capex Spending**: The capital expenditure for DRAM and NAND is projected to increase significantly, with DRAM capex expected to reach W58.8 trillion by 2027 [8]. - **Product Shipment Recovery**: There is an anticipated recovery in shipments for servers, SSDs, and smartphones, with promising growth in the automotive sector as well [10]. - **Inventory Levels**: Current inventory levels for both DRAM and NAND are lower than normal, indicating a tighter supply situation [11]. This summary encapsulates the key points discussed in the conference call, highlighting the competitive landscape, financial performance, and future outlook for the global memory technology industry.

Group 1 - The demand for memory chips is driven by the application of artificial intelligence (AI), leading to concerns about how long the shortage will last [1] - The general manager of Wisdom Technology predicts that the AI-driven shortage may last an entire year, indicating a structural shortage rather than a result of production cuts by suppliers [1] - It is expected that DRAM will experience a shortage throughout 2026, but with new factories from Samsung, SK Hynix, and Micron coming online, the situation may improve by 2027 [1] Group 2 - TrendForce's latest survey indicates that due to strong server demand, DDR5 contract prices are expected to rise throughout 2026, particularly in the first half of the year [1] - The price gap between HBM3e and DDR5 is currently over four times, but as DDR5 prices continue to rise, the profit from DDR5 is expected to surpass that of HBM3e starting from Q1 2026 [2]

Group 1 - The core viewpoint of the article highlights the tightening supply of DRAM, which is driving up the contract prices for DDR5, with expectations that profits in 2026 may surpass those of HBM3e [2] - According to TrendForce's latest survey, the contract price for Server DRAM is expected to rise significantly in Q4 2025 due to increased demand from global cloud service providers (CSPs), leading to an overall increase in DRAM prices [2][3] - The revised forecast for Conventional DRAM prices has been adjusted from an initial increase of 8-13% to a new range of 18-23%, indicating a strong upward trend [3] Group 2 - The AI Server industry analysis by TrendForce indicates that demand from CSPs and sovereign clouds will remain robust in 2026, with global AI server shipments expected to grow by over 20% annually, increasing their share of the overall server market to 17% [6] Group 3 - The competition in the IT OLED panel market is intensifying, with significant investments in the 8.6-generation OLED production lines from various manufacturers, including Samsung Display and Chinese firms like BOE and TCL CSOT [9]

Group 1 - The storage sector in the U.S. stock market has seen significant gains, with SanDisk rising over 16%, Western Digital over 13%, Seagate Technology over 19%, and Micron Technology over 2% [1] - SK Hynix reported a 62% increase in profits, indicating a substantial rise in demand for storage chips driven by the construction of global AI infrastructure [1] - In Q3, SK Hynix achieved a record operating profit of 11.4 trillion KRW (approximately 8 billion USD), slightly exceeding analyst expectations, with sales reaching 24.5 trillion KRW [1] Group 2 - SK Hynix's stock rose by up to 5% in Seoul, reflecting positive market sentiment [2] - According to TrendForce, the contract prices for Server DRAM are expected to strengthen due to the expansion of data centers by global cloud service providers, leading to an overall increase in DRAM prices [2] - The demand for servers is projected to remain strong into 2026, with DDR5 contract prices expected to rise throughout the year, potentially outperforming HBM3e starting in Q1 2026 [2] Group 3 - Morgan Stanley predicts that the storage chip industry is likely to enter a "super cycle" driven by the AI boom [3] Group 4 - Relevant Hong Kong-listed companies in the storage chip sector include Bawen Storage (IPO application submitted), Jingshun Technology (IPO application), SMIC (00981), Hua Hong Semiconductor (01347), and Shanghai Fudan (01385) [4]