CITIC Securities: Storage supply is in short supply and continues to focus on Changxie and shareholder returns

The Zhitong Finance App learned that CITIC Securities released a research report saying that the storage sector has shown a clear correction since June-July 2026 and October 2026. Against the backdrop of a slowdown in product price increases, market concerns about storage supply and demand and competitive patterns have further amplified sector fluctuations. From the perspective of storage companies' 26Q3 earnings report, the shortage of storage supply is expected to continue until 2028 and beyond. Customer demand is driving Changxie to actively sign, while storage manufacturers' new shareholder return policies are being further advanced. The bank suggests continuing to pay attention to investment opportunities in circuit segments such as HDD, DRAM, and NAND.

CITIC Securities's main views are as follows:

Revenue growth rate: 26Q3 DRAM/NAND companies' revenue growth rate continued to decline, but HDD manufacturers' revenue growth rate remained flat or accelerated month-on-month

Looking back at the quarterly revenue data of various overseas storage companies, the overall revenue growth rate of DRAM/NAND manufacturers basically reached a new high in CY26Q1. After the CY26Q2 growth rate slowed, the CY26Q3 growth rate declined further. In terms of the original currency, Micron, Samsung Electronics/Hynix revenue was +31%/+32% month-on-month, respectively, and Sandisk/Kioxia revenue was +23%/+40% month-on-month respectively. The overall revenue growth rate of HDD manufacturers has continued to accelerate since CY25Q4. CY26Q3 Western Digital/Seagate's revenue was +17%/+17% month-on-month, respectively, higher or flat than +12%/+17% of CY26Q2.

Revenue driving force: 26Q3 DRAM/NAND manufacturer ASP continued to decline, HDD vendor ASP growth continued to accelerate, but overall the importance of shipment volume was increasing

1) DRAM/NAND vendors: Previously, the overall revenue growth rate was mainly driven by ASP price increases. The average sales price of overseas storage vendor products experienced three stages of “accelerated rise — strong explosion — high narrowing”. Average price increases for 26Q3 DRAM and NAND slowed further. Among them, Micron, Samsung Electronics/Hynix DRAM ASP rose by high-teens/high -20%/20% month-on-month, and Micron Electronics/Hynix/Sandisk/Kioxa NAND ASP rose 30%/mid -20%/nearly 20%/9%/mid -20% month-on-month respectively. 60% of SanDisk Q3's revenue growth in the quarter came from increased shipments and 40% from price increases.

2) HDD manufacturers: Previously, the overall revenue growth rate was mainly contributed by shipment capacity. ASP continued to accelerate growth in recent quarters. Among them, CY26Q3 Western Digital/Seagate HDD ASP rose 9%/15% month-on-month and 28%/32% year-on-year respectively, while the growth rate of shipment capacity became a drag on HDD manufacturers' financial reports for the past two quarters.

Revenue structure: The share of data center revenue of DRAM and NAND vendors continues to increase, and the share of data center revenue of HDD manufacturers is basically stable. According to the financial report for the third quarter of 2026,

1) Micron: Cloud memory+core data centers accounted for 63% of total revenue (+2 ppts month-on-month).

2) Hynix: DRAM used in data centers (HBM, DRAM for traditional servers) accounts for more than 70% of revenue.

3) SanDisk & Kioxia: SanDisk Data Center accounted for 44% of revenue (+11ppts month-on-month), and Kioxia Data Center's revenue reached 42% (+1ppt month-on-month).

4) Western Digital & Seagate: Since 2025, the share of data center revenue has stabilized at 87%-90% and 75%-81%, respectively.

Changxie: AI/data center demand drives downstream customers to lock supply, and storage vendors continue to push forward Changxie signing (including production capacity, pricing mechanisms, performance guarantees, etc.)

As far as the comparison with the previous signing of the Long Term Cooperation Agreement is concerned,

1) The number of Changxie agreements continues to increase, and the production capacity locked in by each manufacturer is more clear.

2) Previously, the long-term agreement period was basically 3-5 years, but customers actively negotiated contract renewals, extensions, or additional agreements, reflecting overall strong downstream demand.

3) Changxie's customers are still mainly data center CSP, but the customer base has further expanded to other fields such as mobile, automotive, and networking.

4) RPOs calculated based on reserve prices are more clear, such as Micron's $150 billion and SanDisk's $88.9 billion, while customer financial commitments continue to rise.

Storage boom: Shortage of supply is expected to continue until 2028 and beyond, and the DRAM/NAND bit growth rate is expected to fall to low-to-mid 20% /high-teens to mid -20% in 2027

According to the judgment of various storage vendors, Micron expects supply and demand in the CY2027-CY2028 industry to be significantly higher than CY2026. Hynix expects demand to still exceed supply by 2030. Samsung Electronics expects tight storage supply to continue until 2028. SanDisk indicates that demand for NBM pipelines has exceeded supply until the end of 2030, and Western Digital's top seven customers have extended their demand visibility to 2030-2031. The vast majority of Seagate data center near-line storage supplies have been locked to CY2028. Some cloud vendors have supply agreements Continued until CY2030.

Shareholder returns: With the exception of Micron, all other storage vendors have actively promoted a new round of shareholder return policies. It is recommended to focus on subsequent increases in terms of repurchases, cancellations, and dividends

Micron expects to increase capital return from December 9, 2026, and is expected to return 100% of excess cash to shareholders; Hynix expects to return approximately 100 trillion won to shareholders in the 2026 fiscal year; Samsung Electronics' total shareholder return is estimated to be 90-110 trillion won; SanDisk and Kioxia both expect to return 100% of the excess cash to shareholders; Western Digital has returned more than 75% of free cash flow during the quarter; Seagate aims to return 75% of free cash flow to shareholders.

Risk factors:

Risks caused by weakening macroeconomic trends; risk of model capability evolving less than expected; risk of falling short of expectations in the construction and supply of computing power; risk that commercialization of terminal applications falls short of expectations; risk of price inflation of hardware such as memory chips exceeding expectations; risk of increased industry competition; risk of insufficient bond market capacity and negative transmission of equity bonds; risk of policy and AI regulatory uncertainty, etc.