Kioxia's comeback: Breaking the pricing shackles, NAND prices expected to surge by 50% in the first quarter

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Japanese storage chip manufacturer Kioxia is breaking free from the pricing dilemma that has long suppressed its profitability. Driven by AI inference demand, enhanced supply discipline, and limited production capacity, the NAND flash market is entering an unprecedented price surge cycle, with Kioxia's breakthrough pricing adjustment marking an important turning point in the industry landscape.

Daishin Securities recently pointed out that Kioxia will implement the revised pricing policy starting from the first quarter of 2026, and expects the average selling price (ASP) for major North American customers to soar by around 50% quarter-on-quarter. This signifies that Kioxia has finally broken away from the situation where it was forced to supply at below-market prices due to long-term contract constraints, and also means that mobile NAND ASPs are returning to normal levels.

Morgan Stanley is even more aggressive, predicting that Kioxia's ASP in the first quarter will soar nearly 90% quarter-on-quarter, and adjusted gross margin will reach 66%, matching the industry benchmark level. Morgan Stanley raised Kioxia's target price from 14,000 yen to 33,000 yen, representing a 56% upside from the current stock price.

This change not only concerns Kioxia's own turnaround, but also sends a strong signal to the entire NAND industry. Goldman Sachs expects Samsung's NAND business ASP to surge 70% quarter-on-quarter in the first quarter of 2026, and SK Hynix to rise 45%. Against a backdrop of continued supply tension and manufacturers maintaining capital expenditure discipline, the NAND industry is entering a new round of profitability rise cycle.

Goldman Sachs maintains "Buy" ratings for SK Hynix and Samsung Electronics, with target prices of 1.2 million KRW and 205,000 KRW, respectively. Kioxia's strong ASP growth guidance supports the judgment of a NAND price surge cycle, with Samsung's NAND business revenue expected to grow 77% quarter-on-quarter in the first quarter of 2026, and SK Hynix by 38%. Daishin Securities also maintains "Buy" ratings for Samsung Electronics and SK Hynix, believing that the surprise from NAND needs to be further reflected in Korean semiconductor stock prices.

Long-term Contract Shackles Finally Broken

Kioxia has long suffered from pricing disadvantages during this round of NAND upcycle. According to Daishin Securities, the company's high revenue dependence on a single major customer formed a double-edged sword effect—pre-negotiated long-term contracts meant products were supplied below market prices, which is the core reason for Kioxia's ASP growth lagging behind peers.

Recently, the company has obviously taken advantage of the tight supply-demand situation to actively push for price revisions. Daishin Securities estimates that starting in the first quarter of 2026, the revised pricing policy for North American customers will take effect, with ASP expected to rise by about 50% quarter-on-quarter. This marks a pivotal moment for Kioxia to break free from historical constraints and is also an inflection point for mobile NAND price normalization.

Morgan Stanley's data is even more aggressive. The firm raised Kioxia's 2026 calendar year ASP growth forecast from 75% year-on-year to over 100%, and expects ASP to surge nearly 90% quarter-on-quarter in the first quarter, followed by another 10% sequential increase in the second quarter. This guidance far exceeds the previous market expectation of 300 billion yen in operating profit, indicating that the company has made breakthrough progress in price negotiations with major OEM customers.

Supply-Demand Tightness Reaches Unprecedented Level

The supply-demand balance in the NAND market is tightening to unprecedented levels. Kioxia expects NAND bit demand to grow by nearly 20% in the 2026 calendar year, mainly driven by strong data center demand, with a mid- to long-term annual compound growth rate expectation of 20%. Meanwhile, the company expects supply to remain tight throughout this year and to be extremely tight in the foreseeable future.

AI inference applications are strengthening the role of storage and driving an increase in unit content. Daishin Securities points out that at the upcoming GTC 2026 event, new products based on next-generation solutions (Gen 6 Controller) are expected to be launched. On the server side, Kioxia's competitiveness in ultra-high-capacity products of 128TB and above is expected to push its performance ahead of peers.

Supply discipline has been strengthened across the industry. According to Daishin Securities, the industry generally chooses to respond to demand by transforming investments and adjusting product portfolios rather than adding new capacity, because the former carries a lower depreciation burden. This shows that management philosophy is increasingly centered on profitability and long-term supply-demand stability.

Kioxia reaffirmed that it will continue to implement a capital expenditure discipline strategy, planning to control capital expenditure growth in line with the mid- to long-term annual compound growth rate of NAND demand. Goldman Sachs pointed out that as the world's third-largest NAND manufacturer, Kioxia's prudent capacity expansion will further tighten the supply-demand balance in the market. This strategic choice is especially critical at a time when integrated storage manufacturers such as Samsung, SK Hynix, and Micron are increasingly shifting resources to DRAM businesses.

NAND Industry Profitability Surge

The NAND industry is undergoing significant profitability recovery. According to data from Goldman Sachs, Samsung's NAND business operating margin is expected to rise sharply from 25% in the fourth quarter of 2025 to 37% in the first quarter of 2026, SK Hynix will jump from 30% to 42%, and Kioxia's operating margin guidance is in the range of 47% to 63%.

Daishin Securities expects NAND ASP to rise by more than 40% quarter-on-quarter in the first quarter of 2026, and operating margin to quickly reach levels above 50% that marked previous peaks. Kioxia's adjusted gross margin for the December quarter was 40.2%, up 4.3 percentage points quarter-on-quarter, and is expected to reach 66% in the first quarter, matching the industry benchmark level.

Morgan Stanley has significantly raised its earnings forecasts for Kioxia. For fiscal 2027 (ending March 2027), revenue forecast is raised from 2,689.8 billion yen to 4,280.1 billion yen, non-GAAP operating profit doubled from 1,171.8 billion yen to 2,723.2 billion yen, and the adjusted operating margin will reach a high of 64%. Earnings per share are expected to jump from 1,550.2 yen to 3,562.9 yen, and net profit is expected to reach 1,930.3 billion yen.

The main drivers for the upgrades include ASP year-on-year growth of over 100% in the 2026 calendar year, wafer supply income from Western Digital’s SanDisk of about 204 billion yen, and reduced unit costs from improved capacity utilization.

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