Morgan Stanley Research Report Interpretation: Lack of Long-Term Contracts in Traditional Storage May Not Be a Bad Thing, DDR4 and SLC NAND Are Experiencing the Strongest Price Surge Cycle

Written by: Rita

There are heated discussions regarding long-term agreements (LTAs) for mainstream storage chips, but Morgan Stanley believes that the absence of traditional storage LTAs isn't necessarily a bad thing.

In a research report released on August 14, Morgan Stanley pointed out that the fundamentals for the three main traditional storage products—DDR4, SLC NAND, and NOR Flash—are continuously improving, with the supply-demand gap expanding and pricing power strengthening, while mainstream manufacturers are exiting DDR4 supply faster than expected. The report’s title directly addresses market controversy: not having LTAs with fixed prices actually gives traditional storage manufacturers greater pricing flexibility during price upcycles.

Morgan Stanley has raised earnings forecasts across the board for Macronix, Winbond, GigaDevice, and PSMC, while naming AP Memory as its top pick, arguing that the market underestimates the sustainability of the traditional storage cycle.

DDR4 price increases to continue until 4Q26, LTA absence proves advantageous

The market generally ties DDR4's strength to server demand, but Morgan Stanley sees broader sources of demand, with consumer electronics applications also driving DDR4 demand. Global mainstream storage manufacturers are accelerating their exit from DDR4 supply, and supply continues to tighten. Morgan Stanley expects DDR4 prices to rise 50% in 3Q26 and more than 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 constrained by long-term contract price floors.

SLC NAND is the top conviction price gain product

SLC NAND represents Morgan Stanley’s “highest conviction” pricing call in this cycle. The firm expects price gains exceeding 50% both in 3Q26 and 4Q26, driven by ongoing capacity constraints and suppliers’ lack of willingness to allocate wafer starts to traditional products. Industry discussions indicate that supply tightness will last into 2027, meaning this cycle could exceed investors’ expectations in duration.

The migration of MLC demand to SLC also further supports price upside. Morgan Stanley believes SLC NAND could still see price increases in 1H27, making it the area with the largest gap in current market expectations (with the market generally underestimating the sustainability of its price gains).

NOR Flash price increase momentum to extend into 1H27

NOR Flash fundamentals are also improving. After recent price hikes, Morgan Stanley expects another round of increases in 4Q26, with momentum possibly continuing into 1H27. Supply growth remains limited, while demand is being supported by industrial, automotive, networking, and edge AI applications, with AI server demand staying strong. Morgan Stanley's supply-demand model indicates that NOR Flash is in a state of shortage at high-density levels, with supply growth lagging demand growth.

Morgan Stanley raises profit forecasts for four traditional storage companies

Morgan Stanley’s preference ranking among traditional storage stocks is: AP Memory > GigaDevice > Macronix > Winbond > PSMC > Nanya Technology. AP Memory is the top pick due to its SiCap business.

The most significant earnings revisions are for Macronix and GigaDevice. For Macronix, earnings per share for 2026 to 2028 are raised by 139%, 144%, and 147% respectively, with the target price maintained at NT$220, while the bear case is revised down from NT$130 to NT$100. For GigaDevice, 2026 to 2028 earnings per share are raised by 108%, 49%, and 48% respectively, with the target price reduced from RMB 888 to 750, reflecting lower sector valuations after the Changxin Memory IPO. For Winbond, 2026 to 2028 earnings per share are raised by 17%, 30%, and 34%, with the target price maintained at NT$288. For PSMC, 2026 to 2028 earnings per share are raised by 18%, 17%, and 13%, with the target price held at NT$111.

The logic of price increases for traditional storage differs from the mainstream storage market, which is subject to LTAs. The absence of LTAs means there’s no protection from price floors or limitations from price ceilings. When supply gaps widen and pricing power is in the suppliers’ hands, this is the biggest source of profit elasticity. Morgan Stanley’s core view: DDR4 strength will persist at least through 2H26, with price increase momentum for SLC NAND and NOR Flash possibly continuing until 1H27.