Morgan Stanley: Expects DDR4 Price Increases to Continue Until the Fourth Quarter, Maintains "Attractive" View on the Greater China Semiconductor Industry

BlockBeats News, August 18, Morgan Stanley pointed out in its latest Greater China Semiconductor Report that the market has recently been concerned about old-school memory manufacturers lacking LTA long-term agreements, which may weaken the sustainability of the cycle. However, the bank believes that this actually gives these manufacturers higher elasticity during the rapid surge in spot prices. As mainstream memory manufacturers continue to exit mature products like DDR4, the supply-demand relationship for old-school memory is still improving, and the price increase momentum is expected to continue until the fourth quarter of this year, with some categories possibly extending until 2027.

The report stated that the price increase of DDR4 continues to exceed expectations. Previously, the market mostly attributed the strong performance of DDR4 to server demand, but Morgan Stanley has seen consumer electronics-related demand also expanding. The bank expects DDR4 prices to rise by about 50% in the third quarter and experience double-digit growth in the fourth quarter.

SLC NAND is the price category that Morgan Stanley is most optimistic about. The bank expects prices of SLC NAND to rise by over 50% in both the third and fourth quarters, as ongoing capacity constraints persist, and suppliers are reluctant to reallocate wafer capacity to low-generation products. The report believes that the migration of MLC demand to SLC will also support further price increases in the first half of 2027.

The fundamentals of NOR Flash have also improved. Morgan Stanley anticipates that after a recent round of price increases, NOR may see another price hike in the fourth quarter, and the momentum will continue until the first half of 2027. Demand sources include industrial, automotive, networking, edge AI, and AI server-related applications.

On a stock-specific basis, Morgan Stanley raised its profit forecasts for Macronix, Winbond, MegaChips, and Powerchip. Macronix's EPS forecasts for 2026 to 2028 were raised by 17%, 30%, and 34% respectively; Winbond saw a larger increase, with three-year EPS forecasts increasing by 139%, 144%, and 147%. MegaChips, despite a rise in valuation risk premium, had its target price lowered from 888 yuan to 750 yuan, but its EPS forecasts for 2026 to 2028 were still raised by 108%, 49%, and 48% respectively. Powerchip also saw a profit upgrade due to price hikes in mature processes and the opportunity in 3D AI foundry.

Morgan Stanley maintains its "Attractive" view on the Greater China technology semiconductor industry, with Episil Technologies as its top pick, primarily bullish on its SiCap business. However, the report did not further elaborate on the orders, financial contribution, or valuation assumptions of this business.