Morgan Stanley believes legacy memory fundamentals remain strong in the short term

Overview

This report is Morgan Stanley's event commentary on the Greater China semiconductor legacy memory segment. The core trigger was an announcement released by GigaDevice Semiconductor Beijing Inc on the evening of 2026-06-29 stating that niche memory product prices are rising due to supply gaps, while also warning that future capacity expansion could bring significant downside price risk. The report focuses on the short-term supply-demand and pricing outlook for legacy memory products such as DDR4, SLC/MLC NAND, and NOR flash.

Core views

The core view is that the short-term outlook for legacy memory remains optimistic. Morgan Stanley believes that although GigaDevice flagged future industry risks, the strong pricing of DDR4, SLC/MLC NAND, and NOR flash can continue at least through the end of 2026, and it does not expect substantive sharp price cuts in the near term. The report continues to favor legacy memory-related names within its coverage and maintains an Attractive view on the Greater China technology semiconductor sector.

Analysis framework

The report uses a combination of event commentary and supply-demand cycle assessment: it first interprets the supply-demand gap, price increases, and future capacity expansion risks in GigaDevice's announcement, then maps this information to legacy memory markets such as DDR4, SLC/MLC NAND, and NOR flash, and finally assesses the investment implications in conjunction with Morgan Stanley's relative rating system and valuation framework for covered names.

Methodology notes

• Valuation methodResidual income model

  Target price is the base-case value

  The report states that the target price is derived from a residual income model, with key assumptions including an 8.9% cost of equity, 1.1 beta, 2% risk-free rate, 6% risk premium, 40% payout ratio, 16.4% medium-term growth rate, and 3.0% terminal growth rate.

• Rating methodMorgan Stanley relative rating system

  Overweight, Equal-weight, Underweight

  Morgan Stanley uses a relative rating system, where Overweight indicates an expected risk-adjusted total return over the next 12-18 months above the average level of the industry under the analyst's coverage.

Asset mapping & comparison

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

• GigaDevice Semiconductor Beijing Inc (603986.SS)

  Event trigger entity and legacy memory-related name

  Strengths

  Niche memory products are seeing price increases driven by supply gaps; rated Overweight.

  Weaknesses

  The announcement acknowledges that price increases have already suppressed end demand to some extent.

  Comparison

  Within Morgan Stanley's Greater China semiconductor coverage, the company is included in discussions related to legacy memory and NOR/DRAM.

  Risks

  Future expansion of niche memory capacity could lead to significant price declines.

• DDR4, SLC/MLC NAND, NOR flash

  Core products in the legacy memory price cycle

  Strengths

  The report judges that pricing strength in these markets can continue through at least the end of 2026.

  Weaknesses

  Demand is generally stable but may be suppressed by price increases, and supply expansion will weaken the sustainability of price increases.

  Comparison

  Compared with mainstream memory, the short-term price support for legacy and niche memory comes from supply gaps and shifts in capacity focus by mainstream manufacturers.

  Risks

  If new capacity comes online faster than expected, prices may shift from rising to clearly declining.

• Covered legacy memory names

  Sector portfolio view

  Strengths

  Morgan Stanley maintains its Overweight view on covered legacy memory names.

  Weaknesses

  The sector is highly dependent on the price cycle and the stability of end demand.

  Comparison

  The sector view is Attractive, implying a positive view on sector performance relative to the broader market benchmark over the next 12-18 months.

  Risks

  Weaker NOR demand, slower-than-expected DRAM development, or insufficient chip design competitiveness could all undermine the investment thesis.

Key data

• Sector viewAttractiveThe report lists the Greater China technology semiconductor sector view as Attractive.
• GigaDevice Semiconductor Beijing Inc ratingOverweight (O)The rating date is 2025-05-15.
• GigaDevice Semiconductor Beijing Inc priceRmb815.00The table shows the price date as 2026-06-30.
• Latest recorded target priceRmb888The target price history shows a target price of 888 on 2026-06-26.
• Assessment of pricing strengthAt least through the end of 2026Covers DDR4, SLC/MLC NAND, and NOR flash.

Impact & implications

In terms of investment implications, the report interprets the risk warning in GigaDevice's announcement as a medium- to long-term industry supply risk rather than a signal of a near-term cyclical reversal. If legacy memory prices remain strong, related manufacturers' earnings expectations and valuation support may continue; however, if capacity expansion materializes faster or price increases materially suppress demand, the upcycle in legacy memory could end earlier than expected.

Risks

• Substantive price declines may occur after niche memory capacity expansion.
• Price increases may further suppress end demand.
• Weaker NOR demand could drive a downcycle.
• Chip design capabilities may fall short of expectations, or exposure to mid- to high-density NOR products may increase.
• DRAM development may be slower than expected.

What to watch

• Whether DDR4, SLC/MLC NAND, and NOR flash prices can hold through the end of 2026.
• The pace of new niche memory capacity coming online.
• Whether end demand shows more obvious suppression due to price increases.
• GigaDevice's DRAM progress and changes in its NOR product mix.
• Whether Morgan Stanley subsequently adjusts ratings or target prices for covered legacy memory names.