260816_ms_old-memory

PDF 原檔：報告_MS_記憶體產業_20260816_original.pdf

圖片清單（已驗證 2026-08-17）

ingest 時建立的「眼見為憑」圖片索引，是 lib/ 嵌圖的唯一真相來源；嵌入時只從這裡挑分類為「真資料圖」的，不照 trimmed 引用順序猜。

其餘 014/015/019/020/024/025/029/030.png 均 <40KB（15–29KB），依規則未逐張 Read；依報告版面規律推定為同款 Consensus Rating Distribution／Global Revenue Exposure 小型圖表，本次未嵌入。

原始內容

M August 16, 2026 08:07 PM GMT

Greater China Semiconductors | Asia Pacific

Old Memory: No LTAs Is Not Necessarily Bad

Divergence continues between old and mainstream memory. Strong pricing power to sustain into 4Q26, and likely even 1Q27.

Key Takeaways

• Recent investor debates focused on the lack of LTAs and concerns over cycle sustainability, yet we believe legacy memory fundamentals continue to improve.
• DDR4 demand is broadening, while SLC NAND and NOR remain undersupplied, supporting further earnings upside for old memory suppliers.
• We raise earnings estimates for Macronix, Winbond, GigaDevice and PSMC. GigaDevice PT reduced on multiples derating post CXMT's IPO.
• Top Pick remains AP Memory, mainly due to its SiCap business.

DDR4 pricing continues to surprise on the upside into 2H26 . While investors largely associate DDR4 strength with server demand, we increasingly see demand emerging from consumer-related applications as well. Importantly, the absence of fixed-pricing L TAs is not necessarily bad. We also believe the global mainstream vendors continues to phase out the DDR4 supply and supply availability tightening. We believe DDR4 pricing trend can remain stronger than mainstream memory through 2H26. We see a 50% pricing hike in 3Q, and another double digit hike in 4Q.

SLC NAND remains our highest-conviction pricing call . We continue to expect 50%+ price increases in 3Q26 and 4Q26, driven by ongoing capacity constraints and limited supplier willingness to allocate wafer starts to legacy products. As well, industry discussions increasingly point to tighter supply conditions extending into 2027, suggesting the current cycle could prove longer than investors expect. MLC demand migration to SLC also suggests pricing could still show some upside in 1H27.

NOR flash fundamentals also continue to improve . Following the recent round of price increases, we believe another round of price hikes is likely in 4Q26, with momentum potentially extending into 1H27. Supply growth remains constrained, while demand is supported by industrial, automotive, networking and edge-AI applications; demand from AI servers also continue strong.

Stock implications - Significant earnings upsides : We stick to our call that there could be divergent trends for old memory stocks. Winbond: PT unchanged; 202628e EPS raised by 17%, 30% and 34%, respectively. Macronix: Base-case and PT unchanged, but bear case cut to NT$100.00 from NT$130.00; 2026-28e EPS raised by 139%, 144% and 147%, respectively. GigaDevice: Bull, base and bear values cut to Rmb1,300, Rmb750 and Rmb324, respectively, from Rmb1,542, Rmb888 and 648; 2026-28e EPS raised by 108%,49% and 48%, respectively. PSMC: PT unchanged; 2026-28e EPS raised by 18%, 17% and 13%, respectively.

Morgan Stanley Taiwan Limited+

Idea

Greater China Technology Semiconductors

Asia Pacific

Industry View

What's Changed

GigaDevice Semiconductor Beijing Inc (603986.SS) Price Target

Attractive

From

To

Rmb888.00

Rmb750.00

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.

For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company

Winbond

PSMC

GigaDevice

Macronix vullato clanlyeu

EPS Changes

Reason for EPS

changes

PT Changes

Reason for PT Changes

M

18%/17%/13%

pricing outlook the higher sector-wide volatility

Key Charts and Exhibits

• 2026/27/28 EPS

raised by strong DDR4/SLC

108%/49%/48%

• 2026/27/28 EPS

raised by

139%/144%/147%

NAND/ NOR flash pricing outlook

• Benefiting from

MLC NAND/ NOR

• Base case cut to

Rmb750 from

Rmb888

• Bear case cut to

Rmb324 from

Rmb648

• Base case unchanged

strong SLC NAND/. Bear case cut to flash pricing outlook

NT$100 from

NTS130

market demand over the mid- to long-term

• Equity risk premium raised to 6.5% from 6.0%, resulting

Exhibit 1: What's changed

Source: Morgan Stanley Research

Idea

Samoll &.

Rating

Price Target

AP Memory

6531.TW

GigaDevice

603986.SS

Macronix

2337.TW

Winbond

2344.TW

PSMC

6770.TW

M

Market Cap (in USD mm)

Avg Daily Traded Vol (in USD mm)

Street View: Ratings

Buy/Overweight

Hold/Equal-weight

Sell/Underweight

Bull Case Value

Upside (%)|

Bear Case Value

Downside (%)|

Risk/Reward Skew

Morgan Stanley Estimates

Sales

FY26e

EBITDA

EBIT

EPS

FY27e

Sales

EBITDA

EBIT

EPS

FY26 MSe vs. Consensus Mean

Sales

EBITDA

EBIT

EPS

FY27 MSe vs. Consensus Mean

Sales

EBITDA

EBIT

EPS

Valuation Multiples at Last Close

FY26e

P/E

EV/EBIT

EV/EBITDA

EV/Sales

FCF Yield

FY27e

P/E

EV/EBIT

EV/EBITDA

EV/Sales

FCF Yield

Implied Multiples on MS Price Target

FY26e

P/E

EV/EBIT

EV/EBITDA

EV/Sales

P/E

........=----

E

41,326.2

2,017.6

100%

CNY

38,638

27,157

26,907

34.72

66,329

34,539

34,789

45.09

67.5%

126.0%

174.2%

168.2%

130.0%

139.0%

122.1%

180.2%

9.3x

6.6x

6.7x

3.5x

8.7%

16.6x

15.7x

15.6x

8.2x

7,696.2

355.8

99 1

100%

TWD

99,611

54,052

61,530

23.54

198,217

141,065

147,476

60.99

16.5%

60.4%

56.8%

54.4%

40.0%

96.1%

77.5%

78.8%

2.2x

1.0x

1.0x

0.7x

50.7%

7999

3.6x

2.9x

2.7x

2.0x

23,874.9

10,219.8

Nanya Tech

2408.TW

49,118.6

Exhibit 2: Order of preference: GC memory

Source: FactSet (consensus mean), Morgan Stanley Research (e) estimates.

75%

25%

393 28

TWD

9,601

3,029

2,969

17.69

19,356

6,768

6,705

35.37

-9.0%

-5.9%

-7.9%

-5.6%

52.7x

86.8x

45.9x

1.4%

14.5x

26.4x

20.5x

20.3x

7.1x

2.5%

94.2x

86.8x

85.1x

26.8x

47.1x

40.9x

40.5x

14.2x

0%

0%

CAmnolt /.

ExInblt o.

Growth rate

20%

40,000

80%

40,000

30,000

15%

35,000

60%

35,000

10%

25,000

30,000

30,000

20,000

596

40%

25,000

0%

20%

25,000

-5%

20,000

20,000

15,000

-10%

15,000

0%

-15%

15,000

-20%

2012

10,000

10,000

10,000

5,000

5,000

-40%

5,000

-60%

• Samsung.

Gaursa. Aamnanu data Mlaradn Manla, Nasaarch (al aatimataa

CAInbIL 4.

Ivun Hlasll uelllanlu yrowull allu suppiy yrowurky density

Growth rate

20%

40%

30%

M

2013

2014 2015 2016 |

2017

Exhibit 3: NOR flash demand and supply growth rates

-30%

Source: Company data, Morgan Stanley Research

Exhibit 5: DDR4 quarterly supply and demand summary

Source: Company data, IDC, Morgan Stanley Research (e) estimates

Exhibit 7: Quarterly supply breakdown (mn Gb)

Source: Company data, Morgan Stanley Research (e) estimates yuarlehy supply bi canuowir (tllrow)

Junt yuartery supply anu delane summary

Iun hlastl uemlanlu anlu supply growurlaleo

Hlh.nohalgn1

Exhibit 4: NOR flash demand growth and supply growth by

density

Source: Company data, Morgan Stanley Research

Exhibit 6: Quarterly oversupply/undersupply ratio vs. Nanya and Winbond pricing Q/Q change

Source: Company data, IDC, Morgan Stanley Research (e) estimates

Exhibit 8: Quarterly demand breakdown by product (mn Gb)

Source: IDC, Morgan Stanley Research (e) estimates

CAInbll Y.

USS

35

30

25

20

15

10

5

Jan-19

Junt oun ('ono) pricinly chlalt

DDR4 8Gb - 1Gx8 2666Mbps

29.08

M

20,00

Exhibit 9: DDR4 8Gb (1Gx8) pricing chart

Source: DRAMeXchange, Morgan Stanley Research. Data as of Jun 2026.

Exmlbl 10. Jono loou (<oxo) plicmly Chlatt

USS

48.0

38.0

23.0

18.0

13.0 -

8.0 1

3.0 -

DDR5 16G (2Gx8) 4800/5600

• Spot

Contract

45.00

37.50

Exhibit 10: DDR5 16Gb (2Gx8) pricing chart

Source: DRAMeXchange, Morgan Stanley Research. Data as of Jun 2026.

Calvi le

NTS in million

Total Revenues

NTS mn

Sequential Change

Net sales

COGS

Change vs Year Ago

Cost of Sales

Percent of Revenues

Gross Margin

Gross profit

Total Opex

Operating Income

Taxes

Profit Before Taxes

Net income

New '27E

495,128

(169,180)

29

10 г

Old '27E

3Q27E

SOROSES BOSSESS

5.1%

18.5%

432,740

(182,017)

33.4%

325,948

New '28E

1.4%

558,647

(180,294)

16%

Diff.

198 85

11.9%

127%

14%

(42,950) (44,253) (45,346)

30.9%

378,352

250,723

30%

vumbullu. Kuartetly mattelals

1Q25

New '26E

Old '26E

2025

3Q25

4Q25

1Q26

19,993

21,018

21,771|

7.0%

5.1%

3.6%

Diff.

3026E

2026

26,625

59,843

38,253

22.3%

11%

269,908

43.7%

89,052

56.49

-0.6%

298,818

(119,579)

-22%

21%

42.4%

91.3%

184.7%

(14,871) (16,255) (11,605) (15,479) (17,838) (20,198)

74.4%

48.8%

309

0%

319.

:3

18%

31.7%

13208) (*307)

(41,903)

31.7%

31.4%

179,239

(117,684)

58.1%

152,224

77.3%

53.3%

46.6%

33.8%

M

Tax Rate

Taxes

Reported Income (TW GAAP)|

Reported EPS

Margins

Book value per share

Net margin

Opex %

NTS

BVPS

59.96

Old *28E Diff.

2025

2027E

89,406

298,818

495,128

558,647

9.6%

234.2%

493,598

13%

(211,407)

65.7%

(58.210)

(169,180)

65.1%

(119,50%

12.8%

(180,294)

34.2%6

31,196

282,192

34.9%

(37,465)

179,239

60.0%

325,948

65.896

(25,662)

(41.006)

28.7%

244,727

13

5,534

756

(48,213)

9.3%

46.

279.l

6.2%

(924)

245,483

4,610

÷ 38

5.2%

(50,284)

56.

(33)

279

195,186

36

(1,433)

(27,726

(55,940)|

31.1%

19.9%

3,962

44.69

32.3%

378,352

34%

67.7%

(47,577)

8.5%

35%

330,775

35%

50.2%

(53)

330,722.

35%

59.2%

(87,331)

20.4%

263,863|

34%

112,009

20.0%

224,234

24.89

21.27

13.9%|

(1,091)

10.3%

(1,312)

24.1%

2,943

23.0%|

3,422

20.3%

10,114

Winbond: Estimate Revisions and Quarterly Financials

21.8

21.0

22.5

37.5%

13.7%

New '26E

50.30

25.4

27.6

35.5%

12.3%

40.3

33.0

2.0 ppt

1.4 ppt

Diff.

Old '26E

46.68

8%

50.3

100.2

39.8%

100.2

160.2

7.7 ppt

5.5 ppt

13.4

47.2%

50.3

39.5%

We raise our 2026-28 EPS estimates by 17%, 30% and 34%, respectively. This reflects stronger-than-previously expected memory pricing strength across DDR4, NOR flash and SLC NAND. We now expect DDR4 pricing to rise further into 4Q, post the double-digit monthly pricing uptrend. SLC NAND pricing uptrend is highly likely to continue into 4Q, post 50-60% hike in 3Q. NOR pricing could be raised by 30-40% in 3Q and even into 4Q. We also reflect stronger gross margin as a result of the strong price hike.

Exhibit 11: Winbond: Estimate revisions

Source: Morgan Stanley Research (E) estimates

Exhibit 12: Winbond: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

25.4

19.4%

17%

20

49.83

38.29

30%

20|

23

45.3%

9.3%

New '27E

100.18

Exilvll 1o. villbotlu. Molotteal Toi waru r/D

CAMel 14.1

3.5

3.5x

3.0

3.0x

2.5

2.0

1.5

1.0

0.5

0.0

0.0x

Jan-17

01/07/2005

M

Winbond: Valuation Methodology

01/07/2007

Jul-17

Jan-18

01/07/2011

01/07/2013

01/07/2015

— Forward PB (LHS) |

01/07/2009

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

01/07/2017

Jul-21

Jan-22

Jul-22

110%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

-10%

-20%

We keep our PT unchanged at NT$288: We continue to apply P/B multiple methodology to derive our price target, in line with our approach for Greater China memory IDM peers and in view of the industry's high earnings volatility. Our price target (base-case scenario value) implies 5.7x 2026e BVPS and 2.9x 2027e BVPS vs. our prior target multiples of 6.2x 2026e and 3.4x 2027e BVPS, to reflect the higher equity risk premium due to the volatility. Our bull- and bear-case scenario values are unchanged at NT$342.00 and NT $118.00, respectively, implying 3.4x and 1.2x 2027e BVPS, respectively.

Exhibit 13: Winbond: Historical forward P/B

Source: Company data, Morgan Stanley Research estimates

Exhibit 14: Winbond: Historical Forward P/B vs. ROE

Source: Company data, Morgan Stanley Research estimates

Exmble 1o. vmlbunlu. Lammmlyo Lotlfate neviolull Dreautll

2

1.5

1

0.5

-0.5

-1

Jan-16 Jan-17 Jan-18 Jan-19

M

1000%

800%

600%

400%

Exhibit 15: Winbond: Earnings Estimate Revision Breadth

Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Jan-26

—Winbond FY2 EPS Revision (3M MA)

Source: Company data, Morgan Stanley Research estimates

M

Risk Reward - Winbond Electronics Corp (2344.TW) Risk Reward - Winbond Electronics Corp (2344.TW)

DDR, NOR and SLC NAND pricing upside; long-term opportunities in CUBE

NT$288.00 PRICE TARGET

Base case, 2.9x 2027e P/B. This method is in line with the approach we adopt for Greater China memory IDM peers, in view of the industry's high volatility. We believe the stock merits a multiple beyond the high end of its historical band of 0.5-1.5x since 2017, as we are seeing DRAM pricing upside, a sustainable NOR price hike, and opportunities in SLC NAND and SiCap foundry business.

NT$237.50

Mean

Consensus Price Target Distribution

Source: Refinitiv, Morgan Stanley Research

RISK REWARD CHART

Key:

Source: Refinitiv, Morgan Stanley Research

BULL CASE

3.4x 2027e BVPS

NOR Flash pricing and DRAM prices rebound more in the next 12 months: NOR Flash rises dramatically. DRAM prices continue to rise drastically within the next 12 months, with 25nm accounting for >80% of sales.

NT$342.00

NT$200.00

BASE CASE

2.9x 2027e BVPS

Margin expansion bene fi ting from the memory up-cycle: 1) NOR Flash pricing rises significantly in the next 12 months; and 2) DRAM prices rise significantly in the next 12 months.

NT$288.00

MS PT

Morgan Stanley Estimates

NT$288.00

OVERWEIGHT THESIS

• We expect DDR3 and DDR4 price increases to continue in 2026. The supply/demand gap should widen into 2H26.
• We see NOR price hikes continuing throughout 2026.
• High density SLC NAND pricing is catching up, and we now expect a larger TAM from data center applications.
• We share management's view that CUBE could be meaningful in 2026, given engagement with multiple foundry partners and customers.
• We see potential for several headwinds
• ahead for the logic business.
• Our PT implies 2.9x 2027e P/B.

Consensus Rating Distribution

Risk Reward Themes

Pricing Power:

Positive

View descriptions of Risk Rewards Themes here

NT$118.00

1.2x 2027e BVPS

BEAR CASE

NOR Flash prices face pressure in the next 12 months; DRAM market back to oversupply, with slower technology migration: 1) NOR Flash shows price declines; and 2) DRAM prices drop in the next 12 months.

M

Risk Reward - Winbond Electronics Corp (2344.TW)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• DRAM pricing
• NOR pricing
• Technology migration

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

1/5 MOST

3 Month Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• NOR Flash pricing increase, driven by strongerthan-expected demand
• Stronger-than-expected DRAM pricing given ongoing supply shortage
• Faster-than-expected SLC NAND development

RISKS TO DOWNSIDE

• NOR Flash downcycle, driven by weaker demand
• Lower-than-expected DRAM pricing given ongoing oversupply
• Slower-than-expected SLC NAND development

OWNERSHIP POSITIONING

Inst. Owners, % Active

58.8%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

Cambre 1o. 1 manual outllary

Income Statement

NT$mn (Years End Dec)

Net sales

COGS

Variable Cost

Gross profit

Pre-tax income

Income tax

Cash Flow Statement

NT$mn (Years End Dec)

Cashflow from Operations

Net profits

2028E

558,647

(180,294)

2025

89,406

(58,210)

2026E

298,818

(119,579)

2027E

495,128

(169,180)

2025

3,177

2026E

39,979

112,009

M

4,610

Change of ST Investment

139,383

330,722

279,701

(971)

Winbond: Financial Summary

Modelvare EPS (NT$)

Balance Sheet

NT$mn (Years End Dec)

Cash

Mkt Securities

ARINR

Inventory

Other

Current Assets

Long-term investments

Fixed assets

Other assets

Total Assets

SIT borrowings

APINP

Other ST liabilities

LT debt

Other LT liabilities

Total Liabilities

Common stocks

Preferred stocks

Capital Researve

Retained earning

Other shareholders' equity

0.88

2025

15,734

13,347

16,071

25,758

2,281

73,191

19,266

93,800

5,935

192,192

2,739

8,224

35,652

26,399

5,048

78,062

45,000

0

13,752

49,184

0

Total Equity

114,130

Total Liab. & Shrhldr's Equits 192,192

BVPS

25.4

24.89

2026E

36,956

13,347

64,520

120,232

2,281

237,336

19,073

88,581

5,935

350,925

2,739

30,505

59,873

26,399

5,048

124,565

45,000

13,752

161,415

0

226,361

350,925

50.3

49.83

2027E

233,640

13,347

76,462

142,484

2,281

468,214

19,013

78,796

5,935

571,958

2,739

28,905

58,050

26,399

5,048

121,142

45,000

0

13,752

385,870

0

450,816

571,958

100.2

59.96

2028E

511,108

13,347

82.558

153,846

2,281

763,140

18,973

59,010

5,935

847,059

2,739

31,280

26,399

60,755

5.048

126,222

45,000

0

13,752

655,891

0

720,837

847.059

160.2

Cash Dividend Paid

0

0

0

0

Other adjustments

Exhibit 16: Financial summary

Exchange rate adjustment

0

Net change in cash

(330) 1,633

Financial Ratio

Growth(%)

Turnover

Gross Margin

Margins (%)

Operating Margin

EBITA Margin

Pretax Margin

Return (½)

Net Profit

ROAE D

ROAA

Net Debt/Equity

Gearing (½)

Liabilities/Equity

Ratios (X)

Currentratio

Quick ratio

Others

ARINR Turnover (days)

Inventory Turnover (days)

AP Turnover (days)

Cash Conversion (days)

Source: Company data, Morgan Stanley Research (E) estimates

(O)

11,183

2027E

215,441

224,234

19,785

(35,794)

7,216

(10,331)

(10,000)

0

(331)

(8,425)

0

2028E

286,224

269,798

19,785

(15,083)

11,724

9,649

(10,000)

0

19,649

(18,405)

0

0

0

0

Exmnloll 1O.

Rmb mn

Total Revenues

Sequential Change

Change vs Year Ago

Rmb mn

Net sales

Cost of Sales

Percent of Revenues

Gross Profit

COGS

Gross profit

Incremental Margin

Tetal Opex

RAD

Selling & marketing

Percent of Revenues

Taxes

Operating Income

Net income

Profit Before Taxes

102:

Current Previous

4028€

2026E

2028E

76,136

Uiyabeviue. Yuat telly mlatlulais

1Q25

Current Previous

4Q25

3Q25

2026p

1Q26

1,909

11.9%

17.3%

1,194

63%

2026E

2026E

7,312|

2,372

-11.5%

39.0%

1,307

35%

74.6%

4,188

76.6%

119.4%

226.2%

1,798

38,638

43%

28,399

2,112

29%

2025

2,241

17.4%

13.1%

1,412

63%

2,681

19.6%

31.4%

1,589

59%

M

113

3.0%

234

3.2%

2,150

2028E

9,203

38,638

57,916

26,712

31,204

3,991

27,214

20

27,234

2,501

20

3,352

2,904

2,393

3.8%

121

4.5%

101

4.3%

134

3.2%

GigaDevice: Estimate Revisions and Quarterly Financials

Margins

Taxes

Tax Rate

Gross margin

Net Income, Cont Ops

Percent of Revenues

Operating margin

Reported Income

Percent of Revenues

Pretax margin

Change va Year Ago

Net margin

Reported EPS (Rmb)

Change vs Year Ago

78.6%

1,473

5,450

69.6%

35%

75%

1,461

69.3%

5,439

35%

523%

74%

1496%

63.0%

2.08

490%

7.76

1411%

57.1%

46.0%

45.5%

41.2%

21.6%

23.7%

23.8%

21.8%

58.4%

52.1%

52.1%

47.7%

58.2%

53.9%

0.2%

4.5%

58.4%

We raise our EPS estimates for 2026-28 by 108%, 49% and 48%, respectively. This reflects stronger-than-expected memory pricing across DDR4, NOR flash and SLC NAND. We now expect DDR4 pricing to rise further into 4Q, following the double-digit monthly uptrend. SLC NAND pricing is likely to continue rising into 4Q, after the 50-60% increase in 3Q. NOR pricing could increase by 30-40% in 3Q and extend into 4Q. We also reflect stronger gross margin as a result of the strong price hike.

Exhibit 17: GigaDevice: Estimate revisions

Source: Morgan Stanley Research (E) estimates

Exhibit 18: GigaDevice: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

4Q26€

15,694

1027€

Diff.

36%

15%

0.51

10%

19%

508

19%

61%

0.76

61%

109%

0.85

108%

2027E

3Q27E

16,235

16,789

Current

122

2027E

66,329

4Q27E

1Q28€

17,452

Previous

2027E

17,881

46,298

2028€

3028€

Diff.

43%

2027E

66,329

2028E

76,136

Diff.

31%

42%

47%

46%

Camul 17. olyabeviue. Neoluuat mieotne touel

Rmb mn

100

Total Equity

Net Profit

90

ROAE

80

Spread

70

60

Equity Value

No. of Shares

50

40

2026E

43,073

24,345

78.2%

2027E

67,380

31,610

57.2%

2028E

94,390

36,493

45.1%

2029E

120,312

40,617

37.8%

2030E

149,163

45,207

33.6%

181,274 217,013

2031E

50,315

30.5%

2033E

2035E

256,791 301,064

2032E

56,001

28.1%

62,329

26.3%

350,340

2034E]

69,372

24.9%

M

701

77,211

23.7%

2036E

2037E

405,185

466,226

85,936

22.7%

42,962

14.3%

46,639

13.3%

Average: 36x

GigaDevice: Valuation Methodology

20 Mi

10

0

-1 S.D.: 15x

We cut our price target (base case) to Rmb750.00: We continue to derive our price target from a residual income model, which we believe best captures the stock's longterm value. We cut our intermediate growth rate to 11.3% from 16.4% and our terminal growth rate to 2.5% from 3.0% to reflect stronger changes in the supply environment compared to the end market demand over the mid- to long term. We also raise our equity risk premium to 6.5% from 6.0%, resulting in the cost of equity raising to 9.4% from 8.9%, to reflect higher volatility associated with the broader memory sector. Our other key assumptions remain unchanged, including beta of 1.1, risk-free rate of 2% and payout ratio of 40%.

Our new price target implies a 2027e P/E of 17x, below the historical average of 38x since 2016, but roughly in line with the -1 S.D. at 18x. Our bull-case value falls to Rmb1,300.00 from Rmb1,542.00, and our bear case to Rmb324.00 from Rmb648.00. The risk reward is skewed more toward the bear case now, to reflect the higher volatility associated with the broader memory sector.

Exhibit 19: GigaDevice: Residual income model

Source: Morgan Stanley Research (E) estimates

Exhibit 20: GigaDevice: Historical forward P/E

Source: Company data, Morgan Stanley Research estimates

95,646

22.0%

50,713

12.5%

Oct-16

Oct-17

Oct-18

Oct-19

Oct-20

Oct-21

— GigaDevice 1-year Forward PIE

M

Risk Reward - GigaDevice Semiconductor Beijing Inc Risk Reward - GigaDevice Semiconductor Beijing Inc (603986.SS)

(603986.SS) Multiple drivers ahead

Rmb750.00 PRICE TARGET

Our price target is our base-case value, derived from our residual income model. Key assumptions: cost of equity of 9.4% (beta 1.1, risk-free rate 2% and risk premium 6.5%), a payout ratio of 40%, medium-term growth rate of 11.3% and a terminal growth rate of 2.5%.

Rmb618.62

Source: Refinitiv, Morgan Stanley Research

BULL CASE

29x 2027e EPS

NOR/SLC NAND prices rise more sharply into 2H26, and the company increases production of mid-/high-density NOR; MCU growth accelerates; DRAM business shows signi fi cant contribution: 1) Flash sales grow 300%+ Y/Y in 2026 via price hikes and meaningful growth in demand; 2) MCU sales growth significantly exceeds 40% in 2026; 3) contribution from WoW tops expectations in 2026-28e; 4) DDR4 price hike stronger than expected; 5) gross margin above 60% in 2026.

Rmb1,300.00

BASE CASE

17x 2027e EPS

NOR/SLC NAND and DRAM pricing upside in 2026; moderate WoW contribution: 1) Flash sales rise 348% Y/Y in 2026; 2) MCU grows 28% in 2026; 3) meaningful contribution from WoW in 2026-28e; 4) significant DDR4 price hike in 2026; 5) gross margin at ~79% in 2026.

Rmb750.00

OVERWEIGHT THESIS

• We expect GigaDevice to continue to gain share in China's MCU market. Auto MCUs offer bigger opportunities as local selfsufficiency is low.
• We see further NOR Flash pricing upside, and expect GigaDevice NOR quality to catch up in the auto segment.
• Specialty DRAM pricing started to rebound in late 1Q25, and there are opportunities such as wafer-on-wafer specialty memory.
• We believe GigaDevice will ramp up 16G LPDDR4 and 32G DDR4 at CXMT's Gen 4 platform in 2027.
• Our price target implies 2027e P/E of 17x, below the historical average of 38x from 2016, but roughly in line with the -1 S.D. of 18x.

Consensus Rating Distribution

Risk Reward Themes

Pricing Power:

Positive Positive

Secular Growth:

View descriptions of Risk Rewards Themes here

BEAR CASE

7x 2027e EPS

NOR/SLC NAND price falls sharply into 2H26; MCU faces stronger competition from foreign and local vendors; pause in DRAM business development: 1) Flash sales grow less than expected in 2026, as ASP starts to drop towards the end of the year; 2) MCU sales decrease >10% Y/Y in 2026; 3) contribution from WoW falls below expectations in 2026-28e; 4) DDR4 price starts to decline toward the end of 2026; 5) gross margin below 35% in 2026.

Rmb324.00

M

Risk Reward - GigaDevice Semiconductor Beijing Inc (603986.SS)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Beneficiary of MCU localization
• Decreasing opex burden
• Development of AI glasses market

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3 Month Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• NOR up-cycle driven by stronger demand
• Superior chip design, leading to increasing exposure to low-density NOR
• Faster-than-expected DRAM development

RISKS TO DOWNSIDE

• NOR down-cycle driven by weaker demand
• Inferior chip design, leading to increasing exposure to mid-/high-density NOR
• Slower-than-expected DRAM development

OWNERSHIP POSITIONING

Inst. Owners, % Active

86.1%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

Income Statement

Rmb mn (Years End Dec)

Net sales

COGS

Gross profit

Income tax

2025

9,203

2028E

76,136

2027E

66,329

2026E

38,638

Cash Flow Statement

Rmb mn (Years End Dec)

Cashflow from Operations

2025

2,032

M

Minority interests

(45)

(45)

(45)

(29)

Change of ST Investment

0

GigaDevice: Financial Summary

Reported EPS (Rmb)

Balance Sheet

Rmb mn (Years End Dec)

Cash

Mkt Securities

AR/NR

Inventory

Other

Current Assets

Long-term investments

Fixed assets

Deferred assets

Other assets

Total Assets

S/T borrowings

AP/NP

Other ST liabilities

LT debt

Other LT liabilities

Total Liabilities

Common shares

Additional capital

Retained earning

Other shareholders' equity

Total Equity

2.48

2025

9,186

102

199

3,066

873

13,425

4,085

1,325

432

2,129

21,397

200

813

934

0

226

668

2,174

9,201

8,407

946

34.72

2026E

31,739

102

943

3,924

873

37,580

4,085

432

1,325

2,129

45,551

200

1,118

934

0

226

2,478

668

45.09

2027E

48,786

102

1,619

13,130

873

64,509

4,085

1,325

2,129

432

72,481

0

668

9,201

9,201

56,564

946

946

32,257

19,223

Total Liab. & Shrhidr's Equity

21,397

52.05

2028E

74,170

102

1,858

15,070

873

92,072

4,085

1,325

432

2,129

100,043

200

4,293

934

226

5,653

668

9,201

83,574

946

94,390

100,043

43,073 67,380

45,551

72,481

E = Morgan Stanley Research Estimates

Source: Morgan Stanley Research, Company Data

Increase in S/T debt

Cash Dividend Paid

(698)

0

(243)

(494)

2028E

35,117

36,493

250

(1,626)

(250)

(250)

(9,483)

(9,483)

Exhibit 21: Financial Summary

Other adjustments

Exchange rate adjustment

Net change in cash

Financial Ratios

Growth(%)

Turnover

Operating profits

EPS

Margins (%)

Gross Margin

Operating Margin

Pretax Margin

Net Margin

Return (%)

ROAE

ROAA

Gearing (%)

Net Debt/Equity

Liabilities/Equity

Ratios (X)

Current ratio

Quick ratio

Others

AR/NR Turnover (days)

Inventory Turnover (days)

AP Turnover (days)

Cash Conversion (days)

0

2026E

23,297

24,345

250

(1,297)

(250)

(250)

2027E

24,600

31,610

250

(7,260)

0

(NT$ mn)

Total Revenues

Sequental Change

Change va Year Ago

Net sales

Cost of Saies

Percent of Revenues

Gross Profit

Gross profit

Percent of Revenues

Total Opex

Percent of Revenues

RSO

Percent of Revenues

Sales and Marketngl

Percent of Revenues

Margins

Tetal Non-operating Income(Loss)

Profit Before Taxes

Change vs Year Ago

Taxes

171

171

77,163

rovie. Quartelly mialicials

New 2026e Old 2026e Diff.% New 2027e Old 2027e Diff.% New 2028e Old 2028e Diff.%

17,291|

12,495

11,340

11,116

New 2026e Old 2026e

13,572

11,278

15

50%

27%

(11,653)

104.8%

(536)

107,846

995

(15)

43,266

102,954

41,003

5%

6%

123,668

53,158

75,820

86%

12.2%

22.1%

(11,701)

(12,184)

93.6%

89.68%

16,783

21,439|

16.3%

27,4%

33.3%

2%

84.4%

(12,402)

71.7%

4,289

11%

77,163

1.6%

(12,300)

109.1%

(12.614)

106.3%

18,628

M

.7.74

(74)

118,635

50,792

41,036

41,721

33,377

7.16

1,75€

123,461

14.7%

4%

5%

13%

13%

13%

13%

885

21.3%

171

171

-150%

(1,529)

-22.7%

(41)

-58%

127

104.8%

106

PSMC: Earnings Estimate Revisions

Tax Rate

Reported Income (TW GAAP)

Percent of Revenues

Change vs Year Ago

EPS (NTS)

(NTS)

Change vs Year Ago

Weighted average shares

BVPS

(1,097)

(3,334)

(2.728)

-99%

149.8%

70.3%

-29.6%

-5.2%

10.26

NM

-32%

(654)

104.9%

14,231

56.4%

1397.2%

3.291

-198.7%

-23.0%

(0.80)

NM

Old 2026e

0.78

NM

New 2026e

NM

NM

3.36

NM

4,179

4,188

42.2

43.1

4,190

4,191

4,239

16.0%

3,502

-228.4%

0.75

NM

4,239

MAnraon Otanlo, Dassorch (C)

1.9%

4,659

natimatad

(0.65)

(0.16)

20

37,795

28

We raise our EPS forecasts for 2026-28 by 18%, 17% and 13%, respectively: This reflects stronger-than-expected foundry price hike for both memory and logic at PSMC. We now expect PSMC's foundry pricing to rise further into 4Q, following the strong hike in July. We also reflect stronger gross margin as a result of the strong price hike.

Exhibit 22: PSMC: Earnings estimate revision summary

Source: Company data, Morgan Stanley Research (E) estimates

Exhibit 23: PSMC: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

Min magis

8N33

1, 659

4,850

54.3

26,567

126

105.05.

1,655

121

121.00

4,650

(16,

(17)

(64

4.0

3.5

3

2.0

1.5

2

1.0

0.5

0.0

0

1/1/2021

30%

20%

10%

0%

+2 STD: 3.0x

-10%

-20%

+1 STD: 2.3x

PSMC: Valuation Methodology

5/1/2021

Dec-20

9/1/2021

Apr-21

1/1/2022

Aug-21 -

•P/B

1/1/2023

9/1/2022

— Forwrad PB (LHS) |

-2 Stdev

-1 Std ev

-30%

-40%

-50%

Our price target (also our base case) is unchanged at NT$111.00: We incorporate our revised estimates and maintain our P/B valuation methodology. Our new target is based on a 2027e P/B of 2.0x, down from 2.1x previously, to reflect the higher equity risk premium due to the volatility. The new 2027e P/B is still above the historical average of 1.5x since 2021, reflecting our strong conviction in shipments, ASP improvements and the emerging 3D AI foundry business. We believe PSMC is well positioned to benefit from its Micron partnership, including front-end migration to the one-year process node and backend opportunities in advanced DRAM production (e.g., HBM). The company is also catching up with the DRAM pricing upcycle.

Exhibit 24: PSMC: Historical forward P/B

Source: Company data, Morgan Stanley Research estimates

Exhibit 25: PSMC: Historical forward P/B vs. ROE

Source: Company data, Morgan Stanley Research estimates

P/B (x)

M

M

Risk Reward - Powerchip Semiconductor Manufacturing Co Risk Reward - Powerchip Semiconductor Manufacturing Co (6770.TW)

(6770.TW) Beneficiary of mature node up-cycle and EMIB supply chain

NT$111.00 PRICE TARGET

Base case, 2.0x 2027e P/B. This method is in line with our approach for Greater China memory IDM players, in view of the industry's high volatility. Our 2.0x target P/B is higher than the historical average of 1.5x since 2021, reflecting our optimistic view on improved pricing and utilization.

NT$101.20

Consensus Price Target Distribution

Source: Refinitiv, Morgan Stanley Research

RISK REWARD CHART

Key:

Historical Stock Performance

Current Stock Price

Source: Refinitiv, Morgan Stanley Research

BULL CASE

NT$177.00

3.3x 2027e BVPS

Strong sales growth with gross margin

expansion : Our assumptions include: 1) a revenue CAGR of >40% in 2025-28; 2) gross margin expanding to 45%+ by 2028; 3) mature node foundry up-cycle longer than expected; 4) faster revenue ramp-up of 3D AI foundry business; 5) longer-than-expected specialty DRAM pricing increase .

Price Target

BASE CASE

NT$111.00

2.0x 2027e BVPS

Revenue growth with gross margin

improvement : Our assumptions include: 1) a revenue CAGR of 38.3% in 2025-28; 2) a gross margin increase to 43% by 2028; 3) a mature node foundry up-cycle; 4) additional contribution from 3D AI foundry business; 5) specialty DRAM pricing continuing to increase.

NT$85.00

NT$111.00

MS PT

Mean

Morgan Stanley Estimates

OVERWEIGHT THESIS

• We expect a mature node capacity shortage in 2H27, reflecting fast growth of AI power ICs as a key part of future AI infrastructure.
• 3D AI foundry business is expected to be a major revenue contributor - we expect it to make up 5%, 10% and 14% of total revenue in 2026-28, respectively.
• We see specialty DRAM price hikes continuing throughout 2026.
• Our new target is based on 2027e P/B of 2.0x, down from 2.1x, still higher than the historical average of 1.5x since 2021, reflecting our optimistic view on improved pricing and utilization.

Consensus Rating Distribution

Source: Refinitiv, Morgan Stanley Research

Risk Reward Themes

Disruption:

Positive Positive

Pricing Power:

View descriptions of Risk Rewards Themes here

BEAR CASE

NT$55.00

1.0x 2027e BVPS

Revenue decline with gross margin erosion :

Our assumptions include: 1) a revenue CAGR in the single digits (%) in 2025-28; 2) gross margin of <10% by 2028; 3) mature node foundry capacity no longer in shortage; 4) delays in revenue contribution from 3D AI foundry business; 5) decreases in specialty DRAM pricing.

M

Risk Reward - Powerchip Semiconductor Manufacturing Co (6770.TW)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Demand from consumer electronics clients
• Inventory in the supply chain
• Utilization rate
• Long-term agreements with clients

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3 Month

Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Pricing power is sustained in 2026.
• Listing on main board attracts investment fund flows.
• Aluminum process enjoys higher margins.

RISKS TO DOWNSIDE

• Competition from China intensifies.
• Price erosion is faster than expected.
• Demand from consumer electronics clients weakens further.
• Inventory in the supply chain takes longer to digest.

OWNERSHIP POSITIONING

Inst. Owners, % Active

21.3%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

Cambre 4o. 1 manual outmlary

Income Statement

NTS mn (Years End Dec)

2025

Net sales

COGS

Gross profit

R&D

SG&A

2028e

2026e

2027e

46,730

123,668

107,846

77,163

(48,267) (58,535) (64,580) (70,510)

Cash Flow Statement

NTSmn (Years End Dec)

Cash flow from Operations

Net profits

2025

7,823

(7,813)

M

Pre-tax income

Income tax

Net income

Balance Sheet

NTSmn (Years End Dec)

Cash

Mkt Securities

AR/NR

Inventory

Other

Current Assets

Long-term investments

Fixed assets

Other assets

Total Assets

S/T borrowings

AP/NP

Other ST liabilities

LT debt

Other LT liabilities

Total Liabilities

Common shares

Retained earning

Other shareholders' equity

Change of ST Investment

Other adjustments

PSMC: Financial Summary

(1.87)

2025

16,789

2,800

6,550

9,557

8,451

44,148

49

122,004

12,485

178,686

0

2,997

19,789

0

73,900

96,685

5.66

2026e

169,850

2,800

4,932

5,699

8,451

191,732

6.54

2027e

229,606

2,800

6,893

6,287

8,451

254,038

49

49

109,520 104,861

12,485

12,485

313,786

371,432

4,509

4,975

34,756

0

73,900

113,166

39,636

73,900

118,511

8.11

2028e

294,682

2,800

7,905

6,865

8,451

320,703

49

101,547

12,485

434,783

5,432

44,479

73,900

123,811

42,259

46,459

46,459

46,459

11,792 101,012 153,313 211,363

53,150

53,150

53,150

27,950

Total Equity

82,000

Total Liab. & Shrhidr's Equity 178,686

200,621

313,786

E = Morgan Stanley Research Estimates

Source: Morgan Stanley Research, Company Data

252,922

371,432

310,972

434,783

Cash Dividend Paid

Dir& Emp Bonus Paid

Exhibit 26: Financial Summary

Other Adjustments

(11,657)

Net change in cash

Financial Ratios

Growth(%)

Turnover

Operating profits

Pretax profits

Net profits

EPS

Margins (%)

Gross Margin

Operating Margin

Pretax Margin

Net Profit

2028e

44,093

37,787

5,594

0

712

0

0

0

Return (%)

ROAA

ROAE

Gearing (%)

Net Debt/Equity

Liabilities/Equity

Ratios (X)

Current ratio

Quick ratio

Others

AR/NR Turnover (days)

Inventory Turnover (days)

AP Turnover (days)

Cash Conversion (days)

(16.7)

(4.3)

32.6

28.2

30.6

10.2

(9.2)

69.6

117.9

17.8

(47.8)

8.9

13.4

(61.6)

56.4

46.9

9.4

13.4

(71.0)

39.8

(7,477) 27,772

38,071

47,244

12,145

0

2026e

51,678

25,158

7,564

0

18,956

41,439

(15,361)

0

0

2027e

37,710

0

(NTS mn)

(NT$ mn)

Total Revenues

Sequential Change

Net sales

Total Opex

20,26

3026e

Old 2026e

19,125

26,754

82.7%

39.9%

1Q26

New 2026e

10,469

35.4%

99,611

77,854

3027e

2Q27e

New 2027e

51,253

50,407

10.9%

-1.7%

198,217

1Q27e

Diff.%

4Q26e

43,264

46,213

61.7%

6.8%

28%

M

Diluted EPS

R&D

23.54

139%

9.84

60.99

1Q28e

Old 2027e

4Q27e

50,343

50,283

-0.1%

-0.1%

16.4%

143,216

72,197

8.8%

(9,675)

(9,216)

40,669

58,187

41,066

80.8%

58,171

81.7%

(4,432)

49,257

(4,450)

25.02

8.8%

8.9%

20,28e

Diff.%

3028e

New 2028e

4Q28e

50,169

50,117

-0.1%

38%

120%

200,794

-0.5%

(8,965)

(8,715)

142%

41,259

41,454

82.1%

144%

82.6%

144%

8.9%

(4,469)

(4,487)

144%

Macronix: Earnings Estimate Revisions

General and Admin

Percent of Revenues

Operating margin

Operating Income

Percent of Revenues

Pretax margin

Net margin

Total Non-operating Income(Loss)

Profit Before Taxes

Percent of Revenues

NT$

Change vs Year Ago

Taxes

BVPS

Tax Rate

Net Income, Cont Ops

(503)

4.8%

54.3%

1,933

55.0%

18.5%

46.5%

134

2,066

19.7%

New '26E

-313.2%

(287)

45.11

-13.9%

1,779

(922)

2.1%

28.597

66.1%

175

28,773

66.5%

29.4%

Old '26E

-9613.2%

(4,402)

31.41

15.3%

24,371

(922)

4.8%

8,968

46.9%

232

9,200

48.1%

-753.6%

(1,464)

-15.9%

7,736

Exhibit 27: Macronix: Earnings estimate revisions

Reported Income (TW GAAP)

Percent of Revenues

Change vs Year Ago

Reported Diluted EPS (NTS, TW GAAP)

Reported Basic EPS (NTS, GAAP)

2025

Old 2028e

2026e

2027e

28,880

99,611

198,217

11.6%

144,185

(23,749)

5,131

17.8%

(8,829)

30.6%

(5,714)

19.8%

(1,520)

5.3%

(1,594)

74,529

244.9%

99.0%

(32,174)

(39,636)

67,438

60,159

158,581

67.7%

60,170

80.0%

(13,386)

(17,516)

13.4%

50,950

25.88

8.8%

(7,082)

7.1%

(3,033) |

Diff.%

2028e

200,794

39%

1.3%

122%

(35,345)

145%

165,449

82.4%

146%

147%

(17,911)

8.9%

147%

(7,842)

4.0%

(8,162)

4.1%

(5,800)

3.0%

51.7%

(3,270)

30.7 ppt

2.9%

(3,874)

41.7%

(5,875)

2.9%

(3,874)

(969)

71.2%

(969)

-0.1%

-0.4%

(8,448)

165,449

147,537

41,670

83.1%

148,299

(4,505)

125,594

63.79

9.0%

(2,070)

4.1%

(1,466)

2.9%

82.4%

(969)

73.5%

We raise our 2026-28 EPS forecasts by 139%, 144% and 147%, respectively: This reflects stronger-than-expected memory pricing across NOR flash and SLC/MLC NAND. SLC/MLC NAND pricing is likely to continue rising into 4Q, following the 50-60% increase in 3Q. NOR pricing could increase by 30-40% in 3Q and extend into 4Q. We also reflect stronger gross margin as a result of the strong price hike. 328 9.0% (8,407) 15.3% (21,694) 15.3% (22,690) 15.3%

31,066

60.6%

(4)

31,173

62.0%

(4)

31,641

63.1%

(4)

(3,305)

-11.4%

(3)

46,360

46.5%

(15)

120,097

60.6%

(15)

125,609

62.6%

(15)

Source: Company data, Morgan Stanley Research (E) estimates

Exhibit 28: Macronix: Quarterly financials

Source: Company data, Morgan Stanley Research (E) estimates

(4)

(4)

(4)

8.9%

camvl c?. 1 uwalu r/o vo. nUnL

6.0

M

3.0

Macronix: Valuation Methodology

1.0

0.0

P/B multiple(x)

— Forward PB (LHS)

160%

120%

80%

ROAE (%)

We maintain our price target (base case) of NT$220: We continue to use a P/B multiple methodology to derive our price target, in line with our approach for Greater China memory IDM peers and in view of the industry's high volatility. Our new target is based on a 2027e P/B of 2.1x, down from 3.9x previously, to reflect the higher equity risk premium due to the volatility. The new 2027e P/B is still above the historical band of 0.5x to 1.5x since 2017, as we remain positive on the strong pricing power of the company's SLC/MLC NAND products.

We keep our bull-case value of NT$355, which is 3.3x our 2027e BVPS. We cut our bearcase value to NT$100.00 from NT$130.00, which is 0.9x our 2027e BVPS. The risk reward is skewed more toward the bear case now to reflect the higher volatility associated with the broader memory sector.

Exhibit 29: Forward P/B vs. ROAE

Source: Factset, Morgan Stanley Research

M

Risk Reward - Macronix International Co Ltd (2337.TW) Risk Reward - Macronix International Co Ltd (2337.TW)

OW on legacy Flash opportunities

NT$220.00 PRICE TARGET

Base case, P/B, in line with our Greater China memory coverage, due to the industry's cyclical nature. We apply a target multiple of 2.1x to our 2027 BVPS estimate vs. its historical average of 1.5x since 2017. We continue to believe the P/B target is justifiable, as the MLC and legacy TLC NAND could be in greater shortage into 2H26, with under-supply easily reaching 40%. We believe the only supplier that could fill the gap remains Macronix.

NT$194.67

MS PT

Source: Refinitiv, Morgan Stanley Research

BULL CASE

NT$355.00

3.3x 2027e BVPS

Higher than expected price hike for legacy NAND, and signi fi cant price hike for NOR

throughout 2026: NAND revenue grows

1200%+, and NOR flash revenue grows 150%+ Y/Y in 2026.

Consensus Price Target Distribution

NT$136.00

BASE CASE

NT$220.00

2.1x 2026e BVPS

Signi fi cant price hike for legacy NAND, and continued price hike for NOR throughout

2026: NAND revenue grows 1270%, and NOR flash revenue grows 169% Y/Y in 2026.

NT$251.00

OVERWEIGHT THESIS

• MLC and legacy TLC NAND could be in greater shortage into 2H26, with undersupply easily rising to 40%. The only supplier that could fill the gap, in our view, remains Macronix. Pricing for MLC and legacy TLC could could rise over 200% from 1Q26 to 4Q26.
• We expect low-single-digit NOR undersupply throughout 2026, driven by capacity cannibalization from other highmargin products.
• ROM may benefit from the Nintendo
• Switch 2, which started selling in June 2025. ▪ We view the current P/B valuation as
• attractive given the strong near-term outlook.

Risk Reward Themes

Pricing Power:

Positive

Secular Growth:

Positive

View descriptions of Risk Rewards Themes here

BEAR CASE

NT$100.00

0.9x 2027e BVPS

Moderate price hike for legacy NAND, and fl attish price for NOR throughout 2026:

NAND revenue grows <150%, and NOR flash revenue grows <80% Y/Y in 2026.

M

Risk Reward - Macronix International Co Ltd (2337.TW)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• NOR pricing trend
• SLC NAND pricing
• Peers' production expansion

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

1/5

MOST

3 Month

Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Wider legacy NAND supply/demand gap
• NOR up-cycle, driven by limited supply expansion and/or stronger demand
• Faster growth for Switch hardware and core titles

RISKS TO DOWNSIDE

• Less severe legacy NAND supply/demand gap
• NOR down-cycle, driven by faster supply expansion and/or demand weakness
• Slower growth for Switch hardware and core titles

OWNERSHIP POSITIONING

Inst. Owners, % Active

49.6%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

Samble ou. 1 manual vultmlary

Income Statement, 2025.2028e, Year End Dec

(NTS mn)

2025

Turnover

YoY Growth

Less: COGS

Gross profit

YoY Growth

% margin

2025

14,913

2026e

37,987

28,880

11.6%

2026e

99,611

244.9%

2027e

198,217

99.0%

2028e

200,794

1.3%

Balance sheet

(NTS mn)

Assets

Cash & Equivalents

M

Operating Expenses:

78,500

7

190

6,613

3,909

153,978

(8,829)

(13,386)

(17,516)

(17,911)

Total Assets

Macronix: Financial Summary

-5.8%

-12.8%

64

(3,633)

2.5%

-12.6%

328

(3,308)

(1.78)

(1.78)

2025

(0.0)

(0.1)

46.7%

0.1x

2.4x

1.6x

143

247

58

R&D

YoY Growth

% margin

Total Non-op

Pretax Profit

YoY Growth

% margin

Tax

Reported Net Income

Reported EPS (NTS)

ModelWare EPS (NTS)

Key Ratios

Return (%)

ROAA

ROAE

OP. ATO

Gearing (x)

Net Debt/ Equity

Current Ratio

Quick Ratio

Operating Cycle

AR/NR Turnover (days)

Inventory Turnover (days)

AP Turnover (days)

Cash Conversion (days)

331

-1561.8%

54.3%

715

54,767

-1607.3%

55.0%

(8,407)

46,345

23.54

23.54

2026e

0.2

0.3

81.4%

0.1x

6.1x

4.4x

84

222

51

255

e = Morgan Stanley Research Estimates

Source: Company Data, Morgan Stanley Research

161.0%

71.2%

726

141,791

158.9%

71.5%

(21,694)

120,082

60.99

60.99

2027e

0.4

0.6

146.6%

(0.5x)

15.5x

13.8x

54

210

46

218

4.6%

73.5%

761

148,299

4.6%

73.9%

(22,690)

125,594

63.79

63.79

2028e

0.4

0.5

155.2%

(0.7x)

25.6x

24.1x

56

224

49

231

Other Payable

L-T Liabilities

Total Liabilities

Common Stock

Preferred Stock

Capital Reserve

Retained earnings

Total Equity

Treasury Stock

Cash Flow Statement

(NTS mn)

Net Income

Depreciation

Net Investment Losses (Gains)

Others

Cash Flow-Operating

(Purchase) of FA

Sale of Fix Asset

(Purchase)L-T Inv.

Sale of L-T Inv.

Sale(Pur.)S-T Inv.

Cash Flow-Investing

Inc(Dec)-S-T Debt

Dividend Paid

Dir. &Emp. Bonus

Proceed from New Issue

Dec/Inc-TreasureSt

Others

Cash Flow-Financing

Change in Cash

Net cash/(debt), b/f

Net cash/(debt), c/f

1,877

1,877

2027e

168,030

7

31,208

23,444

190

223,067

6,609

48,004

3,909

281,588

5,117

1,877

2028e

299,866

7

31,068

20,470

190

351,788

6,606

44,230

3,909

406,533

4,468

1,877

12,404

14,873

14,401

13,752

Total Current Liab.

Exhibit 30: Financial Summary

32,693

65,162

72,690

72,041

M

Risk Reward Reference links

1. View explanation of Options Probabilities methodology -Options_Probabilities_Exhibit_Link.pdf
2. View descriptions of Risk Rewards Themes - RR_Themes_Exhibit_Link.pdf
3. View explanation of regional hierarchies - GEG_Exhibit_Link.pdf
4. View explanation of Theme/Exposure methodology -ESG_Sustainable_Solutions_External_Link.pdf
5. View explanation of HERS methodology - ESG_HERS_External_Link.pdf

M

Disclosure Section

The information and opinions in Morgan Stanley Research were prepared or are disseminated by Morgan Stanley Asia Limited (which accepts the responsibility for its contents) and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research), and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents), and/or Morgan Stanley India Company Private Limited having Corporate Identification No (CIN) U22990MH1998PTC115305, regulated by the Securities and Exchange Board of India ('SEBI') and holder of licenses as a Research Analyst (SEBI Registration No. INH000001105); Stock Broker (SEBI Stock Broker Registration No. INZ000244438), Merchant Banker (SEBI Registration No. INM000011203), and depository participant with National Securities Depository Limited (SEBI Registration No. IN-DP-NSDL-567-2021) having registered office at Altimus, Level 39 & 40, Pandurang Budhkar Marg, Worli, Mumbai 400018, India; Telephone no. +91-22-61181000; Compliance Officer Details: Mr. Tejarshi Hardas, Tel. No.: +91-22-61181000 or Email: tejarshi.hardas@morganstanley.com; Grievance officer details: Mr. Tejarshi Hardas, Tel. No.: +91-22-61181000 or Email: msic-compliance@morganstanley.com which accepts the responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research, and their affiliates (collectively, "Morgan Stanley"). Morgan Stanley India Company Private Limited (MSICPL) may use AI tools in providing research services. All recommendations contained herein are made by the duly qualified research analysts.

For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/eqr/disclosures/webapp/generalresearch, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA.

For valuation methodology and risks associated with any recommendation, rating or price target referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-6836-9000. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.