Guotai Junan Securities: It is expected that the original factory will start bidding price increases, and storage module companies may significantly benefit.

Guotai Haitong released a research report stating that storage module companies will significantly benefit from the improvement of supply and demand structure and the expectation of price rebound, especially high-quality companies that can integrate advanced packaging and testing with AI edge computing. The storage industry is expected to benefit from: 1) Demand side: AI+ semiconductor driving storage demand growth, DeepSeek accelerating AI edge applications; 2) Supply side: Original equipment manufacturers restarting production cuts to ease market supply-demand imbalance; 3) Price side: Q2 DRAM and NAND Flash prices have both reached a seasonal turning point, with growth higher than previously expected. Guotai Haitong's main points are as follows: It is expected that the price increase of storage chip contracts in the second quarter will be higher than previously expected in March, with all original equipment manufacturers starting to increase their quotes. According to TrendForce's consultation, NAND Flash manufacturers have gradually reduced production since the fourth quarter of 2024, and the effect has gradually become apparent. In addition, consumer electronics brands have responded to global changes by producing early, driving demand. Combined with the rebuilding of inventory in applications such as PCs, smartphones, and data centers, it is expected that the blended NAND Flash price in Q2 2025 will increase by 3-8% compared to the previous quarter (previously expected increase of 0-5%). According to DRAMeXchange's April report, the average price of general NAND (128Gb 16Gx8 MLC) has increased by 9.61%; For DRAM, downstream brand factories mostly shipped early in Q1 2025 in response to international changes, which helped to clear the inventory in the DRAM supply chain. It is expected that the prices of general DRAM and DRAM including HBM in Q2 will both increase by 3-8% over the quarter (previously expected general DRAM decline narrowed to -0-5%). Specifically in terms of original equipment manufacturer quotes: 1) Micron announced a price increase on March 25, with demand in the memory business sector exceeding expectations; 2) SanDisk announced a more than 10% increase in prices for all its channels and consumer products starting from April; 3) Samsung Electronics is currently negotiating with major global customers to raise storage chip prices, proposing an increase of 3-5%. On the supply side, the reduction in production by storage manufacturers has alleviated market supply-demand imbalance pressures. At the beginning of 2025, all original equipment manufacturers have taken more resolute production reduction measures, reducing the annual production scale, effectively reducing the growth rate of supply bits, which is conducive to quickly alleviating the pressure of market supply-demand imbalance and laying the foundation for price rebound. The bank believes that the supply-demand structure of the storage chip market is expected to significantly improve, including production cuts by original equipment manufacturers, clearance of smartphone inventory, AI, and other factors will boost demand growth, thereby alleviating the situation of oversupply. On the demand side, AI+ storage is driving a significant increase in end device carrying capacity. In 2024, the average carrying capacity of DRAM and NAND Flash in various AI extension applications, such as smartphones, servers, and laptops, has grown. The bank believes that in 2025, with the further penetration of AI applications, the storage capacity of end devices will continue to grow. The bank believes that storage terminal demand is expected to be significantly enhanced with the implementation of AI+ applications: 1) AI smartphones: DeepSeek lowering costs through open source is expected to boost end device configuration, and end-to-end coordination is expected to be greatly enhanced; 2) AI PCs: DeepSeek can help B-end private cloud deploy large models locally, reduce data leakage risks, and C-end users will strengthen their deployment intentions locally. The growth logic of AI PCs is expected to gradually reshape; 3) AIoT: End device applications are expected to fully blossom, with further penetration of AR glasses; 4) Intelligentization of automobiles: Intelligent cars are expected to introduce open-source large models to become larger AIoT terminals, and AI may deeply empower the entire lifecycle of cars. Risk Warning: The price rebound of storage terminals is not as expected; AI application penetration is not as expected.