Morgan Stanley says the global storage industry is moving into a “super cycle,” driven by rising orders from major electronics companies preparing for expected price increases. The bank’s analysis of Kioxia’s latest financial results points to early signs that memory component prices are already climbing.
Kioxia’s revenue from Apple jumped 58% year-on-year to 476 billion yen, outpacing the company’s overall growth rate of 37%. That gap suggests storage pricing is firming as demand accelerates.
Apple increases orders to secure supply
Apple accounted for about 20% of Kioxia’s total sales, up from roughly 18% a year earlier. Morgan Stanley said this reflects faster procurement by Apple to lock in pricing and secure supply ahead of tighter market conditions.
The shift signals that large device makers are moving early to avoid higher costs later, reinforcing expectations of sustained demand pressure.
Inventory buildup signals tighter supply ahead
Kioxia’s inventory rose to 412.6 billion yen as of March 2026, compared with 352.9 billion yen a year earlier. The increase was led by raw materials, particularly early purchases of DRAM used in solid-state drives.
Morgan Stanley linked the buildup to expectations of constrained upstream supply. Companies across the supply chain, from device makers to memory producers, are positioning for continued price increases.
Spending shifts toward advanced production
Kioxia is redirecting capital spending away from construction and toward production equipment. In fiscal 2026, spending on buildings fell sharply to 6.2 billion yen, while machinery investment climbed to 259.8 billion yen.
The shift reflects accelerated deployment of BiCS-8 wafer production at its Yokkaichi and Kitakami facilities. For fiscal 2027, the company plans capital expenditures of 450 billion yen, with most funding aimed at front-end equipment for BiCS-8 and BiCS-10 technologies rather than new factories.
AI demand reshapes pricing dynamics
The broader trend is being driven by demand for artificial intelligence infrastructure, which is absorbing memory supply and pushing up prices. Production capacity is increasingly directed toward high-margin data center components, reducing availability for other uses.
Analysts expect sharp price increases to continue through 2026. Forecasts suggest NAND flash prices could rise by more than 200% and DRAM by over 100% during the year, with further quarterly gains already projected.
This marks a shift away from years of falling component costs toward a period of sustained inflation in memory pricing, sometimes described as “memflation.”
Higher costs ahead for hardware-dependent sectors
Rising memory prices are expected to push up the cost of high-performance computing equipment through 2027. Businesses reliant on GPUs and SSDs face growing capital expenditure pressures as component costs increase.
Morgan Stanley maintained an “overweight” rating on Kioxia, with a price target of 110,000 yen, about 19% above its late-June 2026 level. The valuation is based on an expected 10% free cash flow yield by fiscal 2028 and a price-to-earnings ratio of around 11 times.
The overall outlook suggests that delaying hardware purchases could lead to significantly higher costs as the cycle unfolds.
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