"‘Storage Super Cycle’ in Kioxia's Financial Report: Apple Orders Surge, Raw Material Inventories Soar, Entire Industry Chain Rushing to Get Ahead"

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Morgan Stanley’s latest analysis of Kioxia’s financial report reveals a “supercycle” brewing in the storage industry.

On June 25, according to information from Chasing Wind Trading Desk, the core conclusion of Morgan Stanley’s latest research points to one signal: the supercycle in the storage industry is accelerating, consumer electronics giants are making panic-buy purchases, and upstream manufacturers are frantically stockpiling raw materials. Kioxia’s financial data is the clearest annotation of this cycle.

The report states that Apple’s revenue contribution surged by 58% year-on-year to 476 billion yen, far exceeding Kioxia’s overall growth rate. This not only hints at a significant increase in consumer-side storage prices,but also shows that major customers are “stocking up in advance” before anticipated price hikes.

At the same time, as of the end of March 2026, Kioxia’s raw material inventory soared, mainly from advance procurement of DRAM needed for SSDs, confirming tight expectations in the upstream supply chain. In addition, the company’s capital expenditure is shifting entirely from factory construction to investment in front-end equipment such as BiCS-8.

Morgan Stanley maintains an “Overweight” rating on Kioxia, with a target price of 110,000 yen, and points out that AI-driven demand and strong free cash flow will provide solid support for the stock price.

Apple orders surge 58%, consumer giants start “advance stocking” mode

The most notable feature of the financial data is the sharp divergence in major client orders.

For the fiscal year ending March 2026, annual revenue from Apple reached 476 billion yen, a 58% year-on-year increase. This growth rate not only leads the company’s overall revenue increase (+37%), but also surpasses the overall growth rate of the SSD and storage business (+40%).

Morgan Stanley believes this data supports two significant judgments:

First, the storage price increases in the March 2026 quarter have spread to the consumer side. Previously, the market focused on storage demand from data center clients, but the rapid growth in Apple’s orders indicates that the consumer electronics sector is also experiencing substantial price increases, and Kioxia has substantially raised prices for consumer-side customers.Second, Apple has engaged in advance procurement. Amid strengthened expectations of continued storage price increases, Apple likely engaged in “pull-in procurement” of components to lock in lower costs or secure supply. This behavior directly reflects the “advance layout” logic throughout the entire industry chain.

Historical data shows Apple’s share of Kioxia’s revenue has jumped from about 18% in the fiscal year ending March 2024 to about 20% for the current year, with the absolute figure climbing sharply from 301 billion yen to 476 billion yen.

Notably, two major clients—SanDisk and Dell—disclosed in the previous annual report for the fiscal year ending March 2025, are not listed individually this time as their revenue shares fell below the 10% threshold. SanDisk’s revenue, reported in the quarterly report, was 193.4 billion yen (down 3% year-on-year).

Raw material inventory surges: The entire supply chain is stocking up for the next price hike round

Morgan Stanley believes inventory data in Kioxia’s annual report reveals another key signal.

As of the end of March 2026, Kioxia’s finished goods and work-in-progress inventories remained basically the same as the previous year, but raw material inventory showed a significant increase.

Morgan Stanley determines this change likely stems from advance procurement of DRAM for SSDs. DRAM is a critical raw material for SSD production. During an upward price cycle for storage, locking in raw material supply in advance is a rational choice for manufacturers.

This change in inventory structure echoes Apple’s advance procurement behavior—from end-brand vendors to storage manufacturers, the entire supply chain is laying out in advance in their own ways, betting on continued storage price increases.

In terms of total inventory, as of fiscal year ending March 2026, Kioxia’s total inventory reached 412.6 billion yen, up from 352.9 billion yen in the previous fiscal year, with the increase primarily in raw material inventory.

Capital expenditure shifts: From “building factories” to “installing equipment,” BiCS-8 mass production accelerates

The report points out that Kioxia’s capital expenditure structure underwent a significant shift this fiscal year, reflecting the company’s transition from capacity building to the equipment investment and mass production ramp-up phase.

FY3/25 (previous fiscal year): Among tangible fixed assets, construction in progress for buildings and structures was 109.9 billion yen, while machinery and equipment was 192.7 billion yen, showing large-scale investment in factories and infrastructure such as the Kitakami plant.

FY3/26 (current fiscal year): Construction in progress for buildings and structures dropped sharply to 6.2 billion yen, while machinery and equipment increased to 259.8 billion yen. Morgan Stanley believes this shift indicates capital expenditure is now focused on front-end wafer fabrication equipment for BiCS-8 at the Yokkaichi and Kitakami plants.

Looking to FY3/27 (next fiscal year), Kioxia plans capital expenditure of 450 billion yen, up 166 billion yen year-on-year. Morgan Stanley judges that although there may be cleanroom construction within existing plants, the main direction will still be front-end equipment investment for BiCS-8 and BiCS-10.

This capital expenditure path clearly shows that Kioxia is advancing the construction of mass production capabilities for next-generation NAND flash technology, preparing the supply side for the coming demand peak.

Morgan Stanley maintains an “Overweight” rating on Kioxia, with a target price of 110,000 yen, around 19% upside from the closing price of about 92,290 yen as of June 23, 2026, and lists Kioxia as a Top Pick in the Japanese semiconductor sector.

Morgan Stanley uses the FY3/28 expected free cash flow (FCF) yield of about 10% as a valuation anchor, believing this level provides ample support for the stock price. Based on FY3/28 EPS forecasts, the implied P/E is 11x.

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