Legacy Memory Technology Has Enormous Potential in Data Center Applications

Overview

This report primarily explores Kioxia's GP series high-performance SSD technology presented at its Investor Day and its impact on Greater China memory stocks. The report points out that traditional NAND technology has enormous potential in data center applications, especially suitable for scenarios requiring high read/write speeds. The report maintains an overweight rating for GigaDevice, Winbond, and Macronix, believing these companies will benefit against the backdrop of traditional NAND supply shortages.

Core views

The report's core view is that Kioxia's GP series SSD adopts its proprietary SLC chip, featuring IOPS performance of over 100 million and low-latency characteristics, making it an ideal choice for next-generation AI acceleration. This technology is compatible with Nvidia's Storage-Next solution, capable of extending GPU memory and resolving system memory bottleneck issues. The report believes that traditional NAND technology, due to its fast read/write speed characteristics, is expected to see greater market space in data center applications. Kioxia's technological progress further validates this trend, prompting the report to maintain an overweight rating for GigaDevice, Winbond, and Macronix. Additionally, the report mentions that traditional MLC and TLC NAND may face supply shortages in the future, with Macronix potentially being the only supplier capable of filling this gap.

Analysis framework

The report first analyzes the technical characteristics and application scenarios of Kioxia's GP series SSD through its IR Day presentation. Then, combining Kioxia's technological progress, the report derives the potential growth space for traditional NAND technology in data center applications. The report also uses P/B valuation methods to value the related companies and sets different target multiples based on the cyclical characteristics of the industry. For example, for Macronix, based on its 2026 BVPS estimate, the report sets a target P/B multiple of 7.0x, significantly higher than its historical average of 1.5x since 2017. The report believes this high valuation is reasonable because the future traditional NAND supply shortage is expected to intensify further.

Methodology notes

• Valuation MethodologyPB valuation

  P/B valuation method is used to evaluate the relationship between a company's book value and its stock price.

  The report uses P/B valuation methods to value the related companies, setting different target multiples based on the cyclical characteristics of the industry. This approach helps the report quantify the companies' future profitability and market performance.

• Supply and Demand FrameworkOthers

  The report analyzes the supply and demand situation of traditional NAND technology.

  The report believes that the growth in demand for traditional NAND technology in data center applications may lead to supply shortages, which could affect the performance of related companies. This analytical approach helps the report forecast the future market supply and demand dynamics.

Asset mapping & comparison

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

• GigaDevice (603986.SS)

  Benefits from the growth of traditional NAND technology in data center applications

  Strengths

  Has mature NOR Flash technology and SiCap foundry business, with strong DRAM price increase expectations.

  Weaknesses

  May face downside risks if NOR Flash prices fall or DRAM demand weakens.

  Comparison

  Compared to the other two companies, GigaDevice has more advantages in low-density NOR Flash.

  Risks

  Risks from NOR Flash price fluctuations and DRAM development progress falling short of expectations.

• Winbond Electronics Corp (2344.TW)

  Benefits from the growth of traditional NAND technology in data center applications

  Strengths

  Strong DRAM price increase expectations, stable rising NOR Flash prices.

  Weaknesses

  May face downside risks if NOR Flash prices fall or DRAM demand weakens.

  Comparison

  Compared to GigaDevice, Winbond has stronger competitiveness in DRAM and NOR Flash businesses.

  Risks

  Risks from NOR Flash price fluctuations and DRAM development progress falling short of expectations.

• Macronix International Co Ltd (2337.TW)

  Benefits from the growth of traditional NAND technology in data center applications

  Strengths

  The only supplier capable of filling the traditional NAND supply gap.

  Weaknesses

  May face downside risks if the supply shortage falls short of expectations or demand weakens.

  Comparison

  Compared to the other two companies, Macronix has more advantages in traditional NAND supply.

  Risks

  Risks of traditional NAND supply shortage falling short of expectations or demand weakening.

Key data

• Kioxia GP Series SSD IOPSOver 100 millionSignificant performance improvement compared to traditional SSDs
• Macronix Target P/B Multiple7.0xSignificantly raised from historical average of 1.5x
• Traditional NAND Supply Gap40%Supply shortage expected to intensify in the future

Impact & implications

The report believes that Kioxia's GP series SSD technology will promote the adoption of traditional NAND technology in data center applications, thereby creating opportunities for companies such as GigaDevice, Winbond, and Macronix. As suppliers of traditional NAND technology, these companies will benefit from market demand growth in the coming years. However, the report also notes that if the supply shortage falls short of expectations or demand weakens, these companies may face downside risks.

Risks

• The traditional NAND supply and demand gap is not as severe as expected, resulting in insufficient upward momentum for prices.
• NOR Flash enters a downward cycle, with weakening demand.
• DRAM price increases fall short of expectations, leading to reduced profitability for related companies.

What to watch

• The sustainability and degree of traditional NAND supply shortage.
• The trend of NOR Flash prices and their impact on company performance.
• DRAM development progress and its impact on future market demand.