The A-share memory module leader, Shenzhen Longsys Electronics Co.,Ltd. (Longsys), reported explosive preliminary results for the first half of 2026, forecasting a staggering increase of up to 74,300% in net profit attributable to shareholders, a rare event in A-share history that has sent shockwaves through the capital markets. Despite the positive earnings news, Longsys's stock price has continued to correct. On July 13th, the closing price was 522 yuan, a sharp drop of 11%. It saw a slight increase of 3.15% on the 14th, only to plunge again by 9.38% on the 15th, falling below the 500 yuan mark to close at 488 yuan.
Currently, the memory price increases have been passed on to the consumer market. Visits to multiple distributors revealed that a wave of price hikes for memory modules and storage drives is underway, and it is highly likely that further increases will follow, as manufacturers need time to ramp up production capacity. Some distributors also noted that due to pent-up AI demand, manufacturers are currently supplying less to the retail market, leading to out-of-stock situations for certain brands and models of storage drives.
Beyond strong demand, the massive surge in Longsys's net profit is also attributed to its previous locking in of low-priced wafers. Analysts suggest that once this cost advantage is exhausted, its performance could take a sharp downturn. Capital markets often price in expectations; the subsequent pullback in Longsys's share price after the earnings forecast was released raises the question of whether the positive outlook has already been fully priced in.
Regarding potential future product price adjustments, a representative from Longsys's investor relations department stated that any information should be based on the company's official disclosures. Meanwhile, share sales by the company's executives are still in progress.
Duration of the Storage Price Rally
Behind Longsys's soaring performance, the rise in memory chip prices has fully transmitted from the upstream supply chain to the consumer end. Ordinary consumers have noticed that seemingly overnight, prices for memory and storage drives have been climbing. Visits to electronics markets in Beijing confirmed with multiple brand distributors that prices for memory, storage drives, graphics cards, and CPUs have indeed risen and are likely to continue increasing.
"Prices have been rising for a week, and all our purchase costs have gone up," several agents stated. They noted that prices actually started rising after October 1st last year, with even steeper increases this year. For example, 1TB mobile hard drives from brands like Seagate and Western Digital, which previously cost just over 300 yuan, have now doubled in price. The new wholesale prices are even higher than retail quotes, with the cost for a 1TB non-SSD drive approaching 700 yuan. The internal disk alone could be sold for over 900 yuan. Memory prices have risen even more sharply, with 32GB modules now reaching around 1600 yuan, up from a previous price of just over 600 yuan.
"CPU prices increased by several hundred yuan in just one day on the 7th. Now, manufacturers are issuing new prices roughly every week, and it could be different again next week," said a leading storage brand distributor.
These distributors share a consistent view on the cause of this round of storage price increases: artificial intelligence (AI).
Multiple agents indicated that "AI is consuming all the production capacity, and this is just the beginning. Future demand will only grow larger. Expanding memory fab capacity takes 3 to 5 years, but current demand can't wait. For instance, think about how many people are asking about AI models like Doubao? The results generated by Doubao need somewhere to be stored."
Some dealers also mentioned that manufacturers are currently supplying less to the market, allocating more to AI, which leaves a smaller portion for retail. Consequently, some brands and models of storage drives are out of stock in stores.
Regarding price trends for the second half of 2026, dealers admitted it depends on how long the market sustains. Some were blunt, stating, "Prices won't fall for the time being. Looking at the purchasing trend, it's all about increases."
Commenting on the market situation, an entrepreneur in the storage industry stated that fundamental AI demand is driving this super-cycle of storage price increases. The overall demand level has been elevated, and short-term production capacity cannot keep up with demand growth. The industry will be in an upward phase where supply chases demand for an extended period, leading to a reallocation of value across the industry chain.
The storage business is Longsys's primary operation. Its annual report shows that in 2025, products like embedded storage, solid-state drives, portable storage, and memory modules accounted for almost all of its revenue. Among these, embedded storage contributed the largest share at 43.98%, while portable storage boasted the highest gross margin of 29.77%.
Riding the wave of AI popularity, Longsys submitted a listing application to the Hong Kong Stock Exchange on May 29, 2026, initiating a dual A+H share listing. The prospectus reveals that the company's total revenue for 2023-2024 was 27.589 billion yuan, with a combined gross profit of 3.23 billion yuan and a combined net loss of 332 million yuan. As of December 31, 2025, the company achieved revenue of 22.766 billion yuan, a gross profit of 4.093 billion yuan, and a net profit of 1.498 billion yuan. If successful, Longsys would become China's first independent memory company to achieve dual listings in both the A-share and H-share markets.
Who is Betting Against Longsys?
In its announcement, Longsys attributed the astonishing first-half performance primarily to two factors. First, increased downstream demand and limited overall growth in global memory wafer capacity in the first half led to a favorable semiconductor memory industry climate, allowing the company to successfully renew wafer supply agreements (LTAs or MOUs) with several major global memory wafer manufacturers. Second, the company leveraged its self-developed chips (like the SPU controller chip) and software architecture (like HLC) as technological drivers, supported by its own high-end packaging and testing capacity, to systematically meet diverse and comprehensive AI storage needs at the device level, fully embracing edge AI.
However, the logic for investors exiting is also quite reasonable.
A key premise for the惊人 profit growth in the first half of this year is the low base from the previous year. In the first half of 2025, Longsys's net profit attributable to shareholders was only 14.76 million yuan, and its full-year profit for 2025 was 1.423 billion yuan.
Analysts point out that Longsys's significant performance improvement relies heavily on the 17.961 billion yuan worth of low-cost inventory it accumulated during the global memory cycle downturn. This inventory appreciated in 2025, boosting the company's performance, and continued to rise in 2026, leading to the惊人 results. Longsys's prospectus shows that raw materials constitute the major cost, accounting for 88.1% of total costs as of December 31, 2025. However, this stockpiling has also tied up substantial capital for Longsys. The company's operating cash flow has been negative for five consecutive years, with a net outflow of 2.875 billion yuan in the first quarter of this year.
To maintain its inventory scale at the tens-of-billions level, Longsys has continuously increased its interest-bearing debt. As of the end of the first quarter, the company's long-term borrowings stood at 9.431 billion yuan, a 115% increase from the end of 2025, and its asset-liability ratio climbed to 65.55%.
On one hand, cash flow is strained. On the other hand, the company needs to expand production capacity and raise funds for R&D of high-end memory chips. This is the driving force behind Longsys's urgent push for the Hong Kong listing and a 3.7 billion yuan private placement in the A-share market.
"Where did the money go? It all turned into inventory and accounts receivable. Inventory swallowed 6.3 billion yuan, and accounts receivable accounted for 800 million yuan. The profits earned didn't turn into cash returning to the account; instead, they piled up in the warehouse or are owed by others," an analyst commented.
Regarding Longsys's future, the analyst believes that once the stockpile of low-priced wafers is sold out, new purchases will be made at higher prices. At that point, Longsys's gross margin, currently around 55%, could rapidly decline. Furthermore, if memory product prices fall, the inventory could become a ticking time bomb, leading to significant impairment losses and potentially causing quarterly profits to turn negative.
Since the beginning of this year, Longsys's shareholders and executives have begun密集 share sales. Shareholder and director Li Zhixiong sold approximately 2.4 million shares at an average price of 575.69 yuan per share between May 12 and June 25. Shareholder and deputy general manager Gao Xichun sold 22,986 shares (0.0055% of total share capital) at an average price of 540.77 yuan per share. Both sales have been completed.
Currently, a share sale plan by shareholder and deputy general manager Zhu Yu is underway. Zhu Jun plans to sell no more than 598,400 shares (0.1414% of total share capital) between June 30 and September 29.
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