Author: Rita
While discussions around Long-Term Agreements (LTAs) for mainstream memory chips are heating up, Morgan Stanley believes the absence of LTAs for traditional memory might not be a bad thing.
In a research report released on August 14, 2026, Morgan Stanley pointed out that the fundamentals of three major traditional memory products—DDR4, SLC NAND, and NOR Flash—are continuing to improve, with a widening supply-demand gap, enhanced pricing power, and major manufacturers exiting DDR4 supply faster than expected. The report's title directly addresses the market debate: the lack of fixed-price LTAs actually gives traditional memory suppliers greater pricing flexibility during an upward price cycle.
Morgan Stanley has comprehensively raised its earnings forecasts for Macronix, Winbond, GigaDevice, and Powerchip, while listing AP Memory as its preferred pick, stating that the market underestimates the sustainability of the traditional memory cycle.
DDR4 Price Increases to Extend to 4Q26; Absence of LTAs Becomes an Advantage
The market generally links DDR4's strength to server demand, but Morgan Stanley sees broader demand sources, with consumer electronics applications also pulling demand. Global mainstream memory manufacturers are accelerating their exit from DDR4 supply, leading to a continuous tightening on the supply side. Morgan Stanley forecasts DDR4 prices to rise by 50% in 3Q26 and by more than 10% again in 4Q26. In the absence of LTAs, the spot pricing mechanism allows traditional memory suppliers to fully capture the price increase benefits, without being constrained by the lower bounds of long-term agreement prices.
SLC NAND is the Highest Conviction Price Increase Play
SLC NAND represents Morgan Stanley's "highest conviction" pricing call in this cycle. The firm expects price increases of over 50% in both 3Q26 and 4Q26, driven by persistent capacity constraints and suppliers' lack of willingness to allocate wafer starts to traditional products. Industry discussions suggest supply tightness will persist into 2027, indicating this cycle's length may exceed investor expectations.
The migration of MLC demand towards SLC further supports the upside for prices. Morgan Stanley believes SLC NAND could still see price increases in 1H27, representing the area with the biggest gap versus market expectations (the market generally underestimates the persistence of its price increases).
NOR Flash Price Momentum to Extend into 1H27
NOR Flash fundamentals are also improving. Following recent price hikes, Morgan Stanley expects another round of increases in 4Q26, with momentum likely extending into 1H27. Supply growth remains constrained, while demand is supported by industrial, automotive, networking, and edge AI applications. Demand from AI servers also remains strong. Morgan Stanley's supply-demand model shows NOR Flash is in a state of undersupply at higher density tiers, with supply growth lagging behind demand growth.
Morgan Stanley Raises Earnings Forecasts for Four Traditional Memory Suppliers
Morgan Stanley's preference ranking among traditional memory stocks is: AP Memory > GigaDevice > Macronix > Winbond > Powerchip > Nanya Technology. AP Memory is the top pick due to its SiCap business.
The most significant earnings revisions are for Macronix and GigaDevice. Macronix's 2026-2028 EPS estimates were raised by 139%, 144%, and 147% respectively; its target price remains unchanged at NT$220, while the bear-case scenario was lowered from NT$130 to NT$100. GigaDevice's 2026-2028 EPS estimates were raised by 108%, 49%, and 48% respectively; its target price was lowered from RMB 888 to RMB 750, reflecting sector valuation compression following CXMT's IPO. Winbond's 2026-2028 EPS estimates were raised by 17%, 30%, and 34% respectively; its target price remains unchanged at NT$288. Powerchip's 2026-2028 EPS estimates were raised by 18%, 17%, and 13% respectively; its target price remains unchanged at NT$111.
The price increase logic for traditional memory differs from mainstream memory locked into LTA prices. No LTAs mean no lower price floor for protection, but also no upper price ceiling constraint. When the supply gap widens and pricing power lies with the suppliers, this becomes the greatest source of profit leverage. Morgan Stanley's core judgment is: DDR4 strength will last at least through 2H26, while SLC NAND and NOR Flash price momentum could extend into 1H27.
Disclaimer
This article is TideX Research's collation and interpretation of a third-party brokerage research report (Morgan Stanley, August 14, 2026), combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments cited herein are the views of the analyst from that brokerage firm, representing only the stance of their affiliated institution. They do not represent TideX Research's views and do not constitute any investment advice.
The market carries risks, and decisions should be made independently. This article should not serve as a basis for buying or selling any securities.
