Written by: Rita

The discussions on long-term agreements (LTAs) for mainstream storage chips are in full swing, but Morgan Stanley believes that the absence of long agreements in traditional storage may not necessarily be a bad thing.

Morgan Stanley pointed out in a research report published on August 14 that the fundamentals of the three major traditional storage products, DDR4, SLC NAND, and NOR Flash, are continuously improving, with an expanding supply-demand gap and increased pricing power. Moreover, major manufacturers are exiting DDR4 supply faster than expected. The title of the report directly addresses market controversies: the lack of fixed price LTAs actually allows traditional storage manufacturers to have greater pricing flexibility during price upcycles.

Morgan Stanley has comprehensively raised the profit forecasts for Macronix, Winbond, GigaDevice, and Powerchip, while designating AP Memory as the preferred target, believing that the market underestimates the sustainability of the traditional storage cycle.

DDR4 Price Increase Continues to 4Q26, Absence of LTAs Becomes an Advantage

The market generally correlates the strength of DDR4 with server demand, but Morgan Stanley sees a broader demand source, with consumer electronic applications also driving DDR4 demand. Major global storage manufacturers are accelerating their exit from DDR4 supply, tightening the supply side. Morgan Stanley expects a 50% price increase for DDR4 in 3Q26, with an additional increase of over 10% in 4Q26. In the absence of LTAs, the spot pricing mechanism allows traditional storage manufacturers to fully capture the benefits of price increases, without being bound by lower price limits of long agreements.

SLC NAND is the Highest Certainty Price Increase Variety

SLC NAND is Morgan Stanley’s "highest certainty" pricing judgment in this cycle. Morgan Stanley expects price increases of over 50% in both 3Q26 and 4Q26, driven by continued capacity constraints and a lack of willingness from suppliers to allocate wafers to traditional products. Industry discussions suggest that supply tightness will continue until 2027, and the length of this cycle may exceed investor expectations.

The migration of MLC demand to SLC further supports the price upside. Morgan Stanley believes that SLC NAND still has the potential for price increases in 1H27, which is the current area with the largest discrepancy in market expectations (the market generally underestimates its price increase sustainability).

NOR Flash Price Increase Momentum Continues to 1H27

The fundamentals for NOR Flash are also improving. After recent price increases, Morgan Stanley expects another round of adjustments in 4Q26, with momentum possibly extending to 1H27. Supply growth remains constrained, while demand is supported by industrial, automotive, network, and edge AI applications, with demand for AI servers also remaining strong. Morgan Stanley's supply-demand model shows that NOR Flash is in a supply shortage state at high density levels, with supply growth lower than demand growth.

Morgan Stanley Raises Profit Forecasts for Four Traditional Storage Companies

Morgan Stanley's preferred ranking among traditional storage targets is: AP Memory > GigaDevice > Macronix > Winbond > Powerchip > Nanya Technology. AP Memory is the preferred choice due to its SiCap business.

The most significant profit adjustments are for Macronix and GigaDevice. Macronix’s earnings per share for 2026 to 2028 have been raised by 139%, 144%, and 147%, respectively, with the target price maintained at NT$220, while the bearish scenario has been adjusted down from NT$130 to NT$100. GigaDevice’s earnings per share for 2026 to 2028 have been raised by 108%, 49%, and 48%, respectively, with the target price adjusted down from RMB 888 to RMB 750, reflecting a downward adjustment in sector valuation after Chuangxin's IPO. Winbond’s earnings per share for 2026 to 2028 have been raised by 17%, 30%, and 34%, with the target price maintained at NT$288. Powerchip’s earnings per share for 2026 to 2028 have been raised by 18%, 17%, and 13%, with the target price maintained at NT$111.

The price increase logic of traditional storage differs from mainstream storage that is locked in prices by LTAs. The absence of LTAs means there is no protection from lower price limits, nor constraints from upper price limits. When the supply gap widens and pricing power is in the hands of suppliers, this becomes the greatest source of profit elasticity. Morgan Stanley's core judgment is that the strength of DDR4 will last at least through 2H26, and the price increase momentum for SLC NAND and NOR Flash may continue into 1H27.

Disclaimer

This article is a summary and interpretation of third-party brokerage research reports (Morgan Stanley, August 14, 2026) by潮向研究, combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments quoted in this article reflect the views of the analysts of that brokerage, representing the position of their respective institutions, and do not represent the views of潮向研究, nor do they constitute any investment advice.

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