To The Moon

On November 9, October price data released by the National Bureau of Statistics showed that data storage device prices rose 45.40% year-on-year, while tablet computers, computers and mobile phones rose 29.30%, 23.00% and 16.70% respectively. The price surge in the memory industry has now transmitted from the upstream chip market to the end consumer segment. It should be noted that the 45.40% figure refers to the price increase of consumer-end data storage devices, and does not represent the procurement price increase of DRAM or NAND Flash chips. The two types of prices have different formation mechanisms, yet both point to ongoing adjustments in memory product costs and end-product pricing. For A-share memory module companies, the profit growth brought by price hikes is highly significant, yet it comes alongside another anomalous change. In the first three quarters of 2026, Jiangbolong, Demingli and Baiwei Storage together achieved approximately RMB 31.835 billion in net profit attributable to shareholders, while their combined net cash flow from operating activities was negative RMB 26.005 billion. This divergence between profit and cash flow reflects the unique characteristics of the memory industry's new prosperity cycle. Tight supply not only raised product prices but also forced companies to commit more capital to secure upstream wafer resources. The factors determining corporate competitiveness are gradually extending from sales scale to supply assurance, inventory management and high-end product research and development capabilities.

Behind the price increases, procurement capital occupation rises sharply

Financial reports from the three companies show that the price dividend in the memory industry has not been synchronously converted into operating cash inflows. In the first three quarters, Jiangbolong achieved RMB 14.322 billion in net profit attributable to shareholders, with net cash flow from operating activities at negative RMB 2.274 billion. Demingli achieved RMB 8.746 billion in net profit attributable to shareholders, with net cash flow from operating activities at negative RMB 13.691 billion. Baiwei Storage achieved RMB 8.768 billion in net profit attributable to shareholders, with net cash flow from operating activities at negative RMB 10.041 billion. This phenomenon cannot simply be attributed to difficulties in collecting sales payments. For memory module companies, the time lag between rising raw material prices, increased procurement scale and the product sales cycle is an important reason for cash flow pressure. Unlike international memory manufacturers with wafer fabrication capabilities, most domestic module companies need to procure wafers from upstream, then complete chip design adaptation, packaging and testing, product manufacturing and sales. When upstream supply is tight, locking in wafer resources in advance can ensure order delivery, but it also means greater working capital needs. Demingli's inventory change is particularly striking. As of the end of September, the company's inventory reached RMB 28.986 billion, an increase of 310.66% from the end of 2025. During the same period, accounts receivable reached RMB 5.137 billion and short-term borrowings reached RMB 10.150 billion. The company explained that the inventory increase mainly came from the growth in enterprise-level storage business scale and orders on hand, indicating that the increased stockpiling has business demand support. However, from a financial structure perspective, before products are converted into sales receipts, procurement capital occupation has already occurred. Memory price increases therefore have a dual impact. Companies can obtain price gains from inventory purchased earlier, but they also need to procure the next batch of wafers at higher costs. Inventory in a prosperity cycle is both a resource for winning orders and a capital threshold for realizing profits.

The competitive focus of module makers is shifting

Inventory growth is not unique to Demingli. As of the end of September, Jiangbolong's inventory reached RMB 28.456 billion, up 143.67% from the end of 2025. Baiwei Storage's inventory reached RMB 24.053 billion, a marked increase from RMB 7.868 billion at the end of 2025. The three companies' combined inventory exceeded RMB 80 billion, but inventory scale alone cannot directly indicate the level of risk. More important is what products the companies purchased, what customer orders they hold, and whether they can complete sales before the price cycle changes. Demingli is focusing on expanding its enterprise-level storage business. Enterprise-level products typically need to meet stricter requirements for reliability, stability and continuous supply. Being able to enter relevant customer systems helps enhance a company's technical capabilities and customer stickiness. Baiwei Storage has gained incremental growth in AI edge devices. In the first three quarters, the company's AI emerging edge storage product revenue was approximately RMB 4.823 billion, up 389.64% year-on-year, with applications including smart wearables and other terminals. This indicates that its revenue growth comes not only from price changes but also from support of new application demand. Jiangbolong continues to invest in high-end storage products and proprietary technologies, hoping to enhance its added value in product design, customer service and supply chain management. The three companies have different development paths, but they all face one common problem. Memory wafers still depend on external supply. As upstream manufacturers prioritize allocating capacity to high-value-added products, whether downstream companies can continuously obtain competitive procurement conditions will affect their profitability. Having more inventory does not mean stronger bargaining power. Only when inventory matches certain demand and the company has continuous delivery capability can advance stockpiling become a competitive advantage.

Price increase contribution is slowing, product structure determines next-stage profits

The most noteworthy change in the current memory market is not that prices have already reversed, but that the marginal contribution of continued price increases to corporate profits may decline. In its third-quarter report, Jiangbolong pointed out that global memory supply and demand remain tight, but due to the high price base in earlier periods, the price increases of DRAM and NAND Flash have narrowed significantly compared with earlier periods, and the marginal contribution of wafer price increases to the company's profit has slowed markedly. Its single-quarter net profit attributable to shareholders in the third quarter was approximately RMB 3.745 billion, a clear decline from RMB 6.715 billion in the second quarter. This shows that even if the market remains in a prosperous stage, profit growth cannot rely on the change between procurement prices and sales prices for the long term. As high-priced wafers gradually enter cost accounting, the cost advantage brought by earlier inventory will weaken. After that, what determines module companies' profit levels will be product technology, procurement efficiency, customer structure and continuous supply capability. On the positive side, domestic companies are entering higher-value-added areas such as enterprise-level storage and AI edge devices, which helps reduce dependence on the traditional consumer electronics cycle. Industrial upgrading offers more lasting growth opportunities than short-term price increases. However, end-product price increases may also suppress some demand. If computer and phone manufacturers cannot fully pass costs on to consumers, they may adjust procurement pace or memory capacity configurations, and upstream supply tightness and downstream demand pressure may exist simultaneously. For A-share memory companies, what needs to be closely watched in the next stage is not the absolute scale of inventory, but the synchronized changes in inventory turnover, operating cash flow, product gross margin and high-end business revenue. This round of price increases is generating considerable profits, but memory module companies need to gradually convert the earnings growth brought by the price cycle into sustained cash creation capability and technological competitive advantages. This article was produced with the help of AI tools to collect and organize market data and industry information, combined with auxiliary viewpoint analysis and writing.