Open-source Security: Storage chip manufacturers both domestically and abroad continue to recover their performance, with a focus on niche product price increases.

Open source Securities released a research report stating that in Q2, the market for storage chips experienced a slowdown in product line velocity and continued inventory clearance; looking ahead to Q3, upstream manufacturers and some terminals have preliminary expectations of price increases for Q3, and the market still needs to patiently wait for the consumption of low-priced inventory and the resurgence of traditional Q3 demand. Overseas, Micron's performance in FY2024Q3 exceeded expectations, and Samsung is expected to continue to raise DRAM prices. In China, with manufacturers accelerating their exit from the DDR3 market and inventory gradually clearing, the supply and demand pattern of the niche storage sector in the second half of the year will significantly improve, boosting product prices and the performance of related manufacturers. Weekly Review: Price indices continued to decline, waiting for the recovery of Q3 demand Index-wise, according to the flash market, in the 27th week of 2024, the DRAM index showed a slowing decline, while the NAND index continued to decline, with weekly changes of -0.17% and -0.82% respectively. In terms of prices, Flash wafer prices remained unchanged, while DDR prices fell slightly (down 0.1% MoM); in the channel market, overall demand was under pressure and competitive situations intensified, leading to slight declines in channel SSD and memory prices; in the industry market, SSD and memory prices remained steady, with upstream resources holding a certain level of inventory and generally high supply-side costs, resulting in low inventory stocking intentions for industry storage manufacturers; in the embedded sector, prices stabilized, with a small number of inquiries in the spot market but limited market transactions, overall market sentiment was cautious, and some new phones from manufacturers may bring a resurgence in demand. Looking back at Q2, there was a slowdown in the market velocity of some product lines, with continued inventory clearance; looking ahead to Q3, upstream manufacturers and some terminals have preliminary expectations of price increases for Q3, and the market still needs to patiently wait for the consumption of low-priced inventory and the resurgence of traditional Q3 demand. Overseas: Micron's performance in FY2024Q3 exceeds expectations, and Samsung is expected to continue raising DRAM prices According to the flash market, Micron achieved revenue of $6.811 billion in FY2024Q3, a 17% increase MoM, operating profit margin of 13.8%, a 10.3 percentage point increase MoM; net profit of $700 million, a 47% increase MoM. The company's better-than-expected performance is mainly attributed to the continuous improvement in industry supply and demand, leading to higher product prices and product portfolio optimization, especially in profitable AI-related products. Micron expects prices to continue to rise in 2024, with a focus on transitioning to high-profit product portfolios to improve profitability. According to Shunde Information, Samsung is expected to raise prices for server DRAM and enterprise NAND by 15-20% in 2024Q3. Additionally, with the surge in AI demand, competition for storage chips has intensified, with the company expecting improved performance in the second half of the year. The industry believes that current manufacturers have strong profit demands, providing strong support for product prices, and the development of HBM, crowding out DDR3 and DDR4 capacity, will help improve the supply and demand pattern in this area, maintaining a healthy industry development trend. Domestic: Improvement in multi-sector prosperity, optimistic about the recovery of niche sector manufacturers' performance in the second half of the year With continuous price repairs, the overall prosperity of various sectors of China's storage industry has significantly improved. In terms of chip manufacturers, Puya Semiconductor (Shanghai) Co., Ltd. announced that it achieved revenue of approximately 338 million RMB in April-May 2024, a year-on-year increase of about 131%, with cumulative shipments of about 3.5 billion units in January-May, doubling year-on-year, and currently having sufficient orders (around 170 million RMB, including taxes), with the prospect of continued performance growth. In terms of module manufacturers, Biwin Storage Technology announced that it expects to achieve revenue of 3.1-3.7 billion RMB in the first half of 2024, a year-on-year growth of 169.97%-222.22%, showing impressive performance. Open source Securities believes that with manufacturers accelerating their exit from the DDR3 market and inventory gradually clearing, the supply and demand pattern of the niche storage sector in the second half of the year will significantly improve, boosting product prices and the performance of related manufacturers. Beneficiaries include: (1) Chips: GigaDevice Semiconductor Inc., Puya Semiconductor (Shanghai) Co., Ltd., Dosilicon Co., Ltd., Zbit Semiconductor, Inc., Ingenic Semiconductor, etc.; (2) Interfaces: Montage Technology, Giantec Semiconductor Corporation, etc.; (3) Modules: Shenzhen Longsys Electronics, Biwin Storage Technology, Shenzhen Techwinsemi Technology, Shannon Semiconductor Technology, Sharetronic Data Technology, Netac Technology, etc. Risk warning: Demand recovery is lower than expected, industry competition intensifies, and new product research and development progress is lower than expected.