Japanese memory chipmaker Kioxia is emerging from a prolonged period of pricing constraints that have suppressed its profitability. Driven by AI inference demand, enhanced supply discipline, and limited production capacity, the NAND flash market is entering an unprecedented cycle of price increases. Kioxia's breakthrough pricing adjustment signifies a critical turning point for the industry landscape.

Recent analysis indicates that Kioxia will implement a revised pricing policy starting in the first quarter of 2026, with the average selling price (ASP) for its major North American customers expected to surge by approximately 50% compared to the previous quarter. This development marks a departure from Kioxia's previous situation, where it was compelled to supply products below market rates due to long-term contract obligations. It also signals a normalization of mobile NAND ASPs.

A more aggressive forecast suggests Kioxia's first-quarter ASP could increase by nearly 90% quarter-over-quarter, with an adjusted gross margin reaching 66%, matching industry benchmark levels. This has led to a significant upward revision of Kioxia's target price, implying substantial potential upside from the current share price.

This shift is significant not only for Kioxia's recovery but also as a strong signal for the entire NAND industry. Projections for other major players indicate substantial ASP growth in the first quarter of 2026, with one company's NAND business ASP expected to surge 70% and another's to grow 45%. Against a backdrop of persistent supply tightness and maintained capital expenditure discipline by manufacturers, the NAND sector is entering a new phase of rising profitability.

Analysts maintain positive ratings on key South Korean semiconductor companies, arguing that positive surprises from the NAND segment need to be more fully reflected in their stock prices. Kioxia's strong ASP growth guidance supports the view of an ongoing NAND price upturn, with significant quarter-over-quarter revenue growth anticipated for the NAND businesses of its major competitors.

**Breaking Free from Long-Term Contract Constraints**

Kioxia has long faced a pricing disadvantage during the current NAND upcycle. Analysis suggests that high revenue concentration from a single, large client created a double-edged sword. Pre-negotiated long-term contracts meant supplying products below prevailing market prices, which was the primary reason Kioxia's ASP growth consistently lagged behind its peers.

The company has recently leveraged the tight supply-demand environment to actively push for price revisions. Estimates indicate that the revised pricing policy for North American customers will take effect from the first quarter of 2026, with ASP expected to increase by roughly 50% quarter-over-quarter. This represents a pivotal moment for Kioxia, freeing itself from historical constraints and marking an inflection point for mobile NAND price normalization.

A more bullish forecast has been presented, significantly raising the calendar year 2026 ASP growth expectation for Kioxia and predicting a nearly 90% quarter-over-quarter ASP surge in the first quarter, followed by a further 10% increase in the second quarter. This guidance far exceeds previous market profit expectations, indicating a breakthrough in price negotiations with major OEM customers.

**Supply-Demand Dynamics Reach Unprecedented Tightness**

The supply-demand balance in the NAND market is tightening to historically rare levels. Kioxia anticipates that calendar year 2026 NAND bit demand will grow close to 20%, primarily driven by robust demand from data centers, with a medium to long-term annual compound growth rate expectation of 20%. Concurrently, the company expects supply to remain tight throughout the year and become extremely tight in the foreseeable future.

AI inference applications are strengthening the role of storage and driving higher content per device. It is noted that upcoming industry events are expected to feature new products based on next-generation solutions. On the server side, Kioxia's competitiveness in high-capacity products is anticipated to drive performance that outpaces peers.

Supply discipline has been reinforced across the industry. The prevalent approach involves managing demand through investment conversions and product mix adjustments rather than adding new capacity, due to the lower depreciation burden of the former. This demonstrates a management philosophy increasingly centered on profitability and long-term supply-demand stability.

Kioxia has reaffirmed its commitment to capital expenditure discipline, planning to keep spending growth aligned with the medium to long-term CAGR of NAND demand. As the world's third-largest NAND manufacturer, Kioxia's prudent approach to capacity expansion is seen as a factor that will further tighten the market balance. This strategy is particularly crucial as other major memory manufacturers increasingly shift resources toward their DRAM businesses.

**Explosive Profitability Growth for the NAND Industry**

The NAND industry is undergoing a significant profitability recovery. Data projects that the operating profit margin for one major player's NAND business will rise sharply from 25% in the fourth quarter of 2025 to 37% in the first quarter of 2026, while another's is expected to jump from 30% to 42%. Kioxia's own operating profit margin guidance spans a range from 47% to 63%.

It is expected that NAND ASP will grow over 40% quarter-over-quarter in the first quarter of 2026, with operating profit margins soon reaching levels above 50%, a hallmark of previous peaks. Kioxia's adjusted gross margin for the December quarter was 40.2%, an improvement of 4.3 percentage points from the prior quarter, and is projected to reach 66% in the first quarter, achieving parity with industry benchmarks.

Significant upward revisions have been made to Kioxia's profit forecasts for the fiscal year ending March 2027. The revenue forecast has been raised substantially, and the non-GAAP operating profit projection has more than doubled, implying an adjusted operating profit margin as high as 64%. Earnings per share and net profit forecasts have also been raised dramatically.

The primary drivers for these upgrades include an expected calendar year 2026 ASP increase of over 100% year-over-year, revenue from wafer supply to SanDisk, and lower unit costs resulting from improved capacity utilization.