Guotai Haitong: Compression technology does not change the shortage of storage, long-term contracts and expanding production are the main trends.

Guotai Haitong released a research report stating that storage is a strong cyclical industry, with the economic cycle often lasting 3-4 years historically. This is also the recent reason for global original factories actively signing long-term contracts; although Google's TurboQuant memory compression technology has disrupted the market, the industry still believes that the storage shortage trend will not change in the short to medium term. One reason is that current factory capacity is almost fully booked, especially in the server sector, and the second is that Google's algorithm only targets the inference link and is based on laboratory data. Even if implemented, it does not mean a contraction in demand. On the contrary, a decrease in inference costs may open up even greater market space. Guotai Haitong's main points are as follows: Storage: Use long-term contracts to hedge against cyclical fluctuations and increase production to seize the economic cycle Biwin Storage Technology announced a $1.5 billion long-term contract, to be delivered evenly over 8 quarters within 24 months (Q2 2026 - Q1 2028), with locked-in prices to hedge against price fluctuations. Google has introduced the TurboQuant memory compression algorithm, but this does not change the trend of storage shortages. The core reasons are that current factory capacity is almost fully booked, especially in the server sector, and the Google algorithm only targets the inference link and is based on laboratory data. Even if implemented, it does not mean a contraction in demand. In fact, a decrease in inference costs may open up even greater market space. KaiXia, SanDisk, SK Hynix-owned Solidigm, and Cisco have subscribed to a private placement of $17.2 billion for NAND Flash Technology to secure future DRAM supply. Logic: U.S. technology blockade intensifies On March 27, the U.S. officially passed the "Chip Security Act," requiring some advanced semiconductors subject to export controls to include "chip security mechanisms," including location verification. The aim of the law is to use technical means to ensure that controlled chips do not "circumvent" entry into China. Wafer testing and packaging: Three major wafer foundries released their 2025 annual reports Semiconductor Manufacturing International Corporation achieved operating income of 67.323 billion yuan in 2025, a year-on-year growth of 16.5%; net profit attributable to owners of the parent company was 5.041 billion yuan, a year-on-year growth of 36.3%; basic earnings per share of 0.63 yuan; gross profit margin was 21.0%, up 3.0 percentage points year-on-year. The annual average capacity utilization rate was 93.5%, an increase of 8 percentage points year-on-year. Hua Hong Semiconductor achieved operating income of 17.291 billion yuan in 2025, a year-on-year growth of 20.18%; net profit attributable to owners of the parent company was 3.77 billion yuan; operating net cash flow was 5.065 billion yuan, a year-on-year growth of 40.38%. The overall capacity utilization rate reached 106.1%. Nexchip Semiconductor Corporation achieved operating income of approximately 10.885 billion yuan in 2025, an increase of 17.69% year-on-year; net profit attributable to owners of the parent company was 7.04 billion yuan, an increase of 32.16% year-on-year; basic earnings per share was 0.36 yuan, an increase of 33.33% year-on-year. Semiconductor equipment: Surging orders benefit the industry SK Hynix and the only etching equipment supplier in South Korea, VM, signed a 815.6 billion won semiconductor equipment contract, which is equivalent to 116% of VM's total annual revenue in 2024. Orders from storage manufacturers such as SK Hynix to VM have totaled 224.6 billion won. Wafer bonding company Qinghe Jingyuan completed a strategic financing of 500 million yuan, led by Advanced Micro-Fabrication Equipment Inc. China and Fount Capital, with Beijing Automotive Investment also joining as an investor; existing shareholder ENN Fund continued to invest. Risk warning: End-demand fluctuations exceed expectations, and international technology controls exceed expectations.