Legacy-node memory supply and demand are tightening, with price strength potentially extending into early 2027

Overview

The report focuses on the Greater China legacy-node memory supply chain, arguing that leading suppliers continue to exit supply of older products such as DDR4 while consumer-electronics demand is also broadening, sustaining the divergence in conditions between legacy-node and mainstream memory. The report emphasizes that not entering into fixed-price long-term agreements can allow suppliers to benefit more fully from spot and short-cycle price increases, and is therefore not necessarily negative.

Core views

DDR4, SLC NAND, and NOR Flash all have strong price momentum. The DDR4 supply-demand gap is widening in 2H26; SLC NAND is supported by capacity constraints and manufacturers' reluctance to allocate wafers to legacy products; and NOR Flash is driven by diversified end-market demand. The resulting ASP increases and gross-margin expansion support upward revisions to earnings forecasts for Winbond, Macronix, GigaDevice, and PSMC.

Analysis framework

The report assesses memory product supply and demand, quarterly price trends, end-market demand, capacity allocation, and company earnings sensitivity; at the stock level, it uses P/B valuation or a residual income model and presents risk-reward through bull, base, and bear scenarios.

Methodology notes

• Relative ValuationPrice-to-Book Valuation

  Derives target prices using forecast book value per share and target P/B multiples.

  Used for Winbond, PSMC, and Macronix to reflect asset value and cycle positioning amid highly volatile earnings in the memory industry.

• Intrinsic Value ValuationResidual income model

  Estimates intrinsic equity value based on cost of equity, payout ratio, and medium- to long-term growth assumptions.

  Used for GigaDevice; medium-term and terminal growth rates are adjusted and the equity risk premium is raised to reflect memory-industry volatility.

• Scenario AnalysisBull–Base–Bear Scenarios

  Compares risk-reward under changes in price, demand, margins, and valuation assumptions.

  The report uses product prices, capacity utilization, demand, and the pace of new-business realization as the main scenario variables.

Asset mapping & comparison

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

• Winbond Electronics Corp (2344.TW)

  Benefits from rising DDR, NOR Flash, and SLC NAND prices

  Strengths

  Improving pricing for legacy-node DRAM, NOR, and high-density SLC NAND; long-term opportunities related to SiCap/CUBE.

  Weaknesses

  The logic business may face multiple operational headwinds; high industry volatility constrains valuation multiples.

  Comparison

  Target price maintained at NT$288, implying 2.9x 2027e BVPS; valuation methodology is consistent with Greater China memory IDM peers.

  Risks

  Weaker NOR pricing, renewed DRAM oversupply, slower technology migration, and weaker-than-expected SLC NAND development.

• GigaDevice Semiconductor Beijing Inc (603986.SS)

  Benefits from rising NOR/SLC NAND and specialty DRAM prices, with MCU localization opportunities

  Strengths

  Potential to gain China MCU market share, room for automotive MCU localization, NOR product upgrades, and DRAM development opportunities on the CXMT platform.

  Weaknesses

  Valuation is affected by industry volatility and the medium- to long-term supply environment, resulting in a lower target price.

  Comparison

  Target price of Rmb750, implying 17x 2027e P/E, below the 38x historical average since 2016 and approximately near the -1 standard deviation level.

  Risks

  Declining NOR/SLC NAND prices, intensifying MCU competition, stalled DRAM business progress, and lower-than-expected gross margins.

• Powerchip Semiconductor Manufacturing Co (6770.TW)

  Benefits from mature-node foundry, specialty DRAM price increases, and 3D AI foundry business

  Strengths

  Higher memory and logic foundry pricing, cooperation with Micron, advanced DRAM back-end opportunities, and incremental 3D AI foundry business.

  Weaknesses

  Sensitive to the mature-node cycle; valuation needs to reflect a higher equity risk premium.

  Comparison

  Target price maintained at NT$111, based on 2.0x 2027e P/B, above the 1.5x historical average since 2021.

  Risks

  Weaker consumer-electronics demand, prolonged inventory digestion, lower capacity utilization, faster-than-expected price erosion, and delayed new-business contribution.

• Macronix International Co Ltd (2337.TW)

  Benefits from rising NOR Flash and SLC/MLC NAND prices

  Strengths

  Strong pricing power in SLC/MLC NAND; price increases are expected to materially drive gross-margin and earnings recovery.

  Weaknesses

  Risk-reward is tilted toward the bear-case scenario, and the target P/B multiple has been materially reduced due to industry volatility.

  Comparison

  Target price maintained at NT$220, based on 2.1x 2027e P/B; bear-case value lowered from NT$130 to NT$100.

  Risks

  Falling NAND or NOR prices, weaker-than-expected demand, industry supply recovery, and further valuation compression.

Key data

• DDR4 Price OutlookExpected to rise by about 50% in 3Q26 and by another double-digit percentage in 4Q26Driven jointly by supply exits and broadening demand.
• SLC NAND Price OutlookExpected to rise by more than 50% in both 3Q26 and 4Q26Capacity constraints and limited wafer allocation to legacy products may extend tight supply into 2027.
• NOR Flash Price OutlookMay rise by 30%–40% in 3Q26 and could continue upward in 4Q26Supported by demand from industrial, automotive, networking, edge AI, and AI servers.
• Winbond EPS RevisionsRaised by 17%, 30%, and 34% for 2026–2028, respectivelyTarget price maintained at NT$288.
• GigaDevice EPS RevisionsRaised by 108%, 49%, and 48% for 2026–2028, respectivelyTarget price lowered from Rmb888 to Rmb750.
• PSMC EPS RevisionsRaised by 18%, 17%, and 13% for 2026–2028, respectivelyTarget price maintained at NT$111.
• Macronix EPS RevisionsRaised by 139%, 144%, and 147% for 2026–2028, respectivelyTarget price maintained at NT$220; bear-case value lowered to NT$100.

Impact & implications

At the industry level, legacy-node memory suppliers can retain greater pricing flexibility without fixed-price long-term agreements, and price increases will amplify revenue and gross-margin improvement. From an investment perspective, the report favors companies that can directly benefit from price increases in DDR4, NOR Flash, and SLC NAND and possess differentiated businesses or capacity flexibility; however, valuations must already reflect memory-cycle volatility, supply changes, and the risk of price declines.

Risks

• Legacy-node memory price increases fall short of expectations or reverse earlier than expected.
• The pace at which leading suppliers exit legacy-product supply slows, easing supply-demand tightness.
• Weak consumer-electronics demand and prolonged channel inventory digestion.
• NOR Flash, DRAM, or NAND markets return to oversupply.
• Intensifying MCU competition and slower-than-expected progress in DRAM and new-business development.
• High memory-industry volatility drives up the equity risk premium and lowers valuation multiples.

What to watch

• Actual DDR4 quotes, supply-demand gaps, and the pace of leading suppliers' exits in 3Q26 and 4Q26.
• SLC NAND wafer allocation, capacity constraints, and migration from MLC to SLC.
• Demand trends for NOR Flash in industrial, automotive, networking, edge AI, and AI servers.
• ASP, gross margin, inventory, and capacity utilization at Winbond, Macronix, GigaDevice, and PSMC.
• PSMC's realization of 3D AI foundry revenue and progress in its cooperation with Micron.
• GigaDevice's MCU localization, automotive-grade NOR, and DRAM business progress.