According to a research report from Guotai Haitong, the storage industry is highly cyclical, with historical boom cycles typically lasting three to four years. This explains why global manufacturers are actively securing long-term agreements. While Google's TurboQuant memory compression technology has caused market fluctuations, it does not alter the medium to short-term trend of storage shortages. Primary reasons include manufacturers operating at near-full capacity, particularly for servers, and the fact that Google's algorithm currently targets only inference processes with laboratory data. Even if implemented, it would not necessarily reduce demand; instead, lower inference costs could potentially unlock larger market opportunities. Key points from Guotai Haitong are as follows:
Storage: Hedging cyclical volatility with long-term agreements and seizing opportunities through capacity expansion. Biwin Storage Technology Co.,Ltd. announced a $1.5 billion long-term agreement, with deliveries evenly spread over eight quarters between Q2 2026 and Q1 2028, featuring locked-in prices to hedge against price fluctuations. Google's launch of the TurboQuant memory compression algorithm does not change the storage shortage trend. Core reasons remain: manufacturers are nearly at full capacity, especially for servers, and the algorithm is specific to inference with lab data. Implementation may not curb demand but could expand the market by reducing inference costs. Kioxia, SanDisk, SK Hynix's Solidigm, and Cisco have subscribed to a NT$17.2 billion private placement by Nanya Technology to secure future DRAM supply.
Logic: Escalating U.S. technology restrictions. On March 27, the U.S. formally passed the Chip Security Act, requiring certain restricted advanced semiconductors to incorporate "chip security mechanisms," including location verification features. The act aims to use technical measures to ensure controlled chips do not circumvent restrictions to enter China.
Wafer Foundry and Testing: Three major foundries disclose 2025 annual reports. Semiconductor Manufacturing International Corporation reported 2025 revenue of RMB 67.323 billion, up 16.5% year-on-year; net profit attributable to shareholders of RMB 5.041 billion, up 36.3%; basic EPS of RMB 0.63; and a gross margin of 21.0%, an increase of 3.0 percentage points. Average capacity utilization reached 93.5%, up 8 percentage points. Hua Hong Company reported 2025 revenue of RMB 17.291 billion, up 20.18%; net profit attributable to shareholders of RMB 377 million; and operating net cash flow of RMB 5.065 billion, up 40.38%. Overall capacity utilization was 106.1%. Nexchip reported 2025 revenue of approximately RMB 10.885 billion, up 17.69%; net profit attributable to shareholders of RMB 704 million, up 32.16%; and basic EPS of RMB 0.36, up 33.33%.
Semiconductor Equipment: Surging orders benefit the industry. SK Hynix signed a KRW 81.56 billion semiconductor equipment contract with VM Company, South Korea's sole etching equipment supplier. The contract value is equivalent to 116% of VM Company's total 2024 consolidated revenue. Cumulative orders from memory manufacturers like SK Hynix have reached KRW 224.6 billion. Wafer bonding firm Qinghe Chip completed a RMB 500 million strategic financing round, led by AMEC and FutureX Capital, with BAIC Capital participating. Existing investor Innova Capital continued to add investment.
Risk warnings include terminal demand fluctuations exceeding expectations and international technology controls surpassing forecasts.
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