CITIC Securities: Continued Optimism on Storage Demand Exceeding Expectations, Expects Industry Supply Shortage to Continue Until End of 2027

CITIC Securities Research Report states that driven by AI demand, CITIC Securities believes storage is still in the early to middle stage of a super cycle, and supply and demand will remain tight at least until 2027. Since February, the storage industry has further confirmed its high prosperity, with Kioxia’s performance and guidance exceeding expectations, NAND contract prices rising in the first quarter, and leading domestic module manufacturers releasing performance announcements for January-February that also exceeded expectations. CITIC Securities continues to be optimistic about storage demand exceeding expectations, expecting supply and demand to persist until the end of 2027. Key recommendations: 1) Storage module companies: strong short-term performance explosion capability; 2) Storage design companies: ongoing recommendation of original storage manufacturers and design companies close to OEMs.

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Semiconductors | AI Era Cycle + Growth + Domestic Resonance, Optimistic about Storage Investment Opportunities

Driven by AI demand, we believe storage is still in the early to middle stage of a super cycle, with supply and demand remaining tight at least until 2027. Since February, the industry has further confirmed its high prosperity, with Kioxia’s performance and guidance exceeding expectations, NAND contract prices rising in Q1, and leading domestic module manufacturers releasing performance announcements for January-February that also exceeded expectations. We remain optimistic about storage demand exceeding expectations, expecting supply and demand to continue until the end of 2027. Core recommendations: 1) Storage module companies: strong short-term performance explosion capability; 2) Storage design companies: continued recommendation of original storage manufacturers and design companies close to OEMs.

▍ In the AI era, core upgrades include increased memory bandwidth and capacity, with in-memory computing being a trend. The high prosperity of near-memory computing presents investment opportunities. Focusing on the domestic HBM and CUBE-related industry chain, we recommend four key directions:

1. Storage solution providers: CUBE is a necessary complement, with customized design solutions aiding industrialization and entering high-end markets. Focus on leading companies supported by storage OEMs with first-mover advantages. Also, pay attention to manufacturers developing ultra-thin stacked LPDDR solutions.

2. Semiconductor equipment: Supporting industry needs, benefiting from upgrades in advanced packaging and testing, process optimization, and yield improvements, accelerating domestic supply chain localization. Focus on etching, bonding, and thinning equipment benefiting from advanced packaging upgrades and localization.

3. Advanced packaging: A key breakthrough for high-end storage. Equipment availability is high, with mainland Chinese manufacturers leading in advanced packaging capabilities and expanding capacity. Hybrid bonding is the core of CUBE 2.0. Additionally, HBM industry chain advanced packaging manufacturers support CoWoS.

4. Logic chip companies: Near-memory computing clients, improving their competitiveness and accelerating industrialization. Some design companies are actively deploying 3D structured logic chips, mainly focusing on edge SoC/NPU, with cloud inference cards gradually being deployed. Near-memory computing is expected to help logic chip companies improve product performance, gain competitive advantages, and benefit from AI incremental demand. It is recommended to focus on leading design companies.

▍Risk Factors:

Risks of global macroeconomic downturn; lower-than-expected downstream demand; innovation shortfalls; changes in international industrial environment and increased trade frictions; slower progress in computing power upgrades; cloud vendors’ capital expenditure below expectations; domestic computing chip shipment deployment expectations; slower progress in domestic semiconductor equipment R&D; intensified industry competition; exchange rate fluctuations, etc.

(Source: Jiemian News)