DDR4 Supply Contraction Unlocks Nanya Technology's Pricing Power; Third-Quarter Revenue Growth Expectations Raised

Overview

The report argues that major memory manufacturers' exit from the DDR4 market is creating a supply-driven upcycle. Although Nanya Technology's July shipments declined month-on-month due to inventory streamlining, sales still increased sharply, indicating that price increases were the main driver of the earnings beat. With sizable DDR4 capacity, the company is expected to maintain strong bargaining power from the second half of 2026 to 2027 and offset the competitive impact from CXMT in the near term.

Core views

First, July sales exceeded expectations due to higher actual selling prices rather than volume expansion, confirming the company's strengthened pricing power. Second, even if revenue does not grow sequentially over the following two months, third-quarter revenue is still expected to grow by about 60% QoQ. Third, improved supply discipline resulting from major manufacturers' exit from the DDR4 market is favorable for sustained strength in DRAM prices. Fourth, the expected 2027 P/E is 3.9x, below the report's implied target multiple of 5.2x, suggesting further valuation upside; therefore, the Overweight rating is maintained.

Analysis framework

The report combines monthly sales data, company shipment and inventory information, supply chain checks, DDR4 industry capacity changes, and relative valuation based on P/E and P/B, and uses the Morgan Stanley ModelWare framework to form earnings and financial forecasts.

Methodology notes

• Financial ForecastingMorgan Stanley ModelWare

  Standardized financial forecasting framework

  Unless otherwise stated, the financial metrics in the report are based on the Morgan Stanley ModelWare framework; data marked as research forecasts are estimated by Morgan Stanley Research.

• Fundamental ResearchSupply Chain Checks

  Assessing DDR4 supply-demand and bargaining power through industry chain information

  Supply chain checks indicate that Nanya Technology has sizable DDR4 capacity and strong bargaining power from the second half of 2026 to 2027.

• Valuation methodsRelative Valuation Method

  P/E and P/B valuation

  The report compares the company's expected 2027 P/E, implied target multiple, and global peer valuations, and evaluates fair value under the supply-driven upcycle using price-to-book multiples for different years.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nanya Technology Corp. (2408.TW)

  Core covered stock in the report, maintained at Overweight

  Strengths

  Has sizable DDR4 capacity; strong bargaining power in a supply-constrained environment; July price hike effect was significant; third-quarter revenue growth is expected to exceed prior forecasts.

  Weaknesses

  Recent shipments declined sequentially and inventory was streamlined, making growth highly dependent on price increases; profitability has clear memory-cycle characteristics.

  Comparison

  Expected 2027 P/E is 3.9x, below the report's implied target multiple of 5.2x and broadly in line with global peers at 3.8x.

  Risks

  Slower-than-expected 1a/1b nm process ramp-up, weaker demand for specialty DRAM, a pullback in DRAM prices, and competitive pressure from CXMT.

Key data

• July salesNT$43,868mnUp 49% QoQ and 720% YoY, above the original forecast of 10% to 15% QoQ growth.
• Third-quarter revenue growth forecastAbout 60% QoQ growthEven if August and September are flat QoQ, this remains clearly above the previous forecast of 25% to 30%.
• Target priceNT$580.00Implies approximately 33% potential upside versus the closing price of NT$436.00 on August 4, 2026.
• Expected 2027 P/E3.9xBelow the report's implied target multiple of 5.2x and close to the 3.8x of global peers.
• Estimated 2026 net revenueNT$348,048mnMorgan Stanley Research forecast.
• Estimated 2027 net revenueNT$638,966mnMorgan Stanley Research forecast, reflecting the assumption of a DDR4 upcycle.

Impact & implications

If DDR4 supply continues to contract and prices remain strong, Nanya Technology's revenue, earnings, and valuation could all benefit, with near-term growth driven more by selling prices than shipments. For investors, the key question is whether the company can sustain its current bargaining power into 2027 and improve supply capability through the ramp-up of 1a/1b nm processes; if achieved, the valuation premium implied by the target price would be supported.

Risks

• The ramp-up of the 1a/1b nm process is slower than expected.
• Demand for specialty DRAM from 4K2K TVs and smart set-top boxes is lower than expected.
• If supply discipline among major manufacturers weakens or DDR4 demand softens, DRAM prices may not be sustained.
• Competitive pressure from CXMT may exceed the positive impact of near-term supply contraction.
• Current growth is mainly driven by price increases; if price momentum weakens and shipments do not recover, revenue and earnings may fall short of forecasts.
• Morgan Stanley has business relationships with some covered companies, and investors should note the potential conflicts of interest described in the research disclosures.

What to watch

• Whether monthly sales in August and September 2026 can remain at July levels.
• Whether third-quarter revenue can achieve about 60% QoQ growth.
• The sustainability of DDR4 spot and contract prices.
• The actual capacity progress of major memory manufacturers exiting the DDR4 market.
• The pace of Nanya Technology's 1a/1b nm process ramp-up.
• End-market demand for specialty DRAM and the recovery of the company's shipments.
• The impact of new CXMT supply on DDR4 prices and market share.