Orient Securities released a research report stating that the strong financial performance and optimistic next-quarter guidance from overseas memory giants SK Hynix and SanDisk (SNDK.US) confirm the supply shortage in the memory industry. AI inference demand is becoming a core driver of memory growth and is expected to continuously boost data center demand for DRAM and NAND. Meanwhile, niche memory products like NOR Flash are facing significant supply contraction as production capacity is squeezed out by mainstream products; the tight supply and price increases are anticipated to persist, potentially benefiting relevant domestic manufacturers. The main views of Orient Securities are as follows.

The event involves leading overseas memory manufacturers such as SK Hynix, Samsung, and SanDisk recently releasing their latest quarterly financial reports. Overseas memory giants reported robust earnings. SK Hynix's 25Q4 revenue reached 32.8 trillion won, a 34% increase quarter-over-quarter; operating profit was 19.2 trillion won, up 68% QoQ; the operating profit margin hit 58%, all setting new quarterly records. SanDisk's fiscal 2026 Q2 revenue was $3.025 billion, surging 61% year-over-year and 31% sequentially, with a gross margin reaching 51%. SanDisk forecasts fiscal 2026 Q3 revenue between $4.4 and $4.8 billion, representing a 52% sequential growth at the midpoint, and expects a gross margin of 65%-67%. The report believes the strong results and optimistic guidance from SK Hynix and SanDisk fully reflect that the memory supply shortage is likely to continue.

AI demand is expected to be continuously tapped, driving the persistent memory supply shortage. Some investors are concerned that consumer electronics demand might face pressure, impacting memory demand. However, the report argues that demand related to AI computing power is gradually becoming dominant in the memory sector and is likely to sustain the supply-demand imbalance. From a downstream market share perspective, SanDisk anticipates data centers will become the largest market for NAND in 2026. The AI inference process is expected to significantly alter data center storage architecture, continuously boosting demand for active data storage. At CES 2026, NVIDIA introduced an inference context memory storage platform, and SanDisk estimates related designs could bring an additional 75-100 Exabytes of incremental storage demand by 2027. Beyond NVIDIA, leading AI application and large language model companies are also expected to enhance user experience by strengthening storage capabilities; for instance, Anthropic plans to inject permanent memory into knowledge bases for Claude Cowork, and developers are already creating extensions on Claude to enable long-term memory, allowing it to retrieve the most relevant context from historical conversations. Looking ahead, the incremental storage demand from AI inference is set to be further explored, with overall demand for server-oriented DRAM and NAND expected to maintain rapid growth.

Niche memory capacity is being squeezed by mainstream memory, likely maintaining tight conditions. Some investors pay limited attention to the future supply-demand dynamics of niche memory. The report believes niche memory products like NOR Flash and MLC/SLC NAND Flash are poised to remain in tight supply. From the demand side, niche memory is not just a static market but also a growth market, expected to gain incremental demand from on-device AI and AI computing needs. On the supply side, production capacity for niche memory continues to be squeezed by mainstream memory, with major international suppliers exiting or reducing niche memory production to focus on mainstream products, leading to a significant contraction in supply. Taking MLC NAND Flash as an example, according to TrendForce, this market is entering a tight phase due to supply contraction, with global capacity projected to decrease sharply by 41.7% year-over-year in 2026. Correspondingly, supply for other niche memories like NOR Flash is also under continuous pressure. TrendForce notes that Macronix has reduced its original NOR Flash capacity to expand MLC NAND Flash supply. Overall, niche memory capacity remains constrained by mainstream products, price increases are expected to continue, and domestic manufacturers stand to benefit significantly.

Investment targets include domestic memory chip design firms such as Gigadevice, Puram, Gcore, Dosilicon, Ingenic, and Hensem; domestic memory module manufacturers like Longsys, Demingli, and Biwin; companies benefiting from memory technology iterations including Montage Technology, Union Memory, and ASR Microelectronics; semiconductor equipment companies like AMEC, Jingzhida, Jingyi Equipment, Weidone, Piotech, and Naura; domestic packaging and testing firms such as Kaifa Technology, Huicheng, and Tongfu Microelectronics; and supporting logic chip manufacturers like Nexchip. Risks include slower-than-expected AI adoption, slower-than-anticipated technological iteration, and delays in domestic substitution progress.