Kioxia's Annual Report Reveals a "Storage Super Cycle": Apple Orders Surge, Raw Material Inventories Skyrocket, the Entire Supply Chain Rushes to Prepare
- Core Thesis: Morgan Stanley's research report indicates that the storage industry is entering a "super cycle." Consumer electronics giants, led by Apple, are panic-buying due to anticipated price increases. Upstream manufacturers are also actively stockpiling raw materials, with the entire supply chain transitioning into a price-hike stockpiling mode.
- Key Factors:
- Apple's revenue contribution surged 58% year-over-year to 476 billion yen, far outpacing Kioxia's overall growth rate (+37%), indicating a substantial price increase in the consumer storage market.
- Apple's revenue share rose from approximately 18% to about 20%, and there is evidence of pull-in procurement behavior to lock in costs and secure supply.
- As of the end of March 2026, Kioxia's raw material inventory increased significantly, primarily due to the early procurement of DRAM for SSDs, reflecting expectations of tight upstream supply.
- Kioxia's capital expenditure structure shifted entirely from factory construction (with building-related transfers plummeting to 6.2 billion yen) to front-end equipment investment for BiCS-8 (with machinery-related transfers surging to 259.8 billion yen).
- Morgan Stanley maintains an "Overweight" rating on Kioxia with a target price of 110,000 yen, based on an approximate 10% free cash flow yield and an implied P/E ratio of 11 times.
Original author: Dong Jing
Original source: Wall Street Sights
The latest annual report interpretation of Kioxia by Morgan Stanley reveals a "super cycle" brewing in the storage industry.
On June 25, according to information from the Zhui Feng Trading Desk, the core conclusion of Morgan Stanley's latest research report points to a clear signal: The super cycle in the storage industry is accelerating, with consumer electronics giants panic-buying and upstream manufacturers frantically stockpiling raw materials. Kioxia's annual report data serves as the clearest footnote to this cycle.
The report states that revenue contributed by Apple surged 58% year-over-year to 476 billion yen, far exceeding Kioxia's overall growth rate. This not only suggests a substantial price increase for storage in the consumer segment but also indicates that key clients are "pre-stocking" in anticipation of price hikes.
Meanwhile, Kioxia's raw material inventory surged as of the end of March 2026, primarily due to early procurement of DRAM needed for SSDs, confirming the tight supply expectations upstream in the supply chain. Additionally, the company's capital expenditure is shifting entirely from plant construction to investment in front-end equipment like BiCS-8.
Morgan Stanley maintains an "Overweight" rating on Kioxia with a target price of 110,000 yen, stating that AI-driven demand and strong free cash flow will provide solid support for the stock price.
Apple Orders Surge 58%, Consumer Giants Initiate "Pre-Stocking" Mode
The biggest highlight of the annual report data lies in the sharp divergence in orders from major clients.
For the fiscal year ending March 2026, annual revenue from Apple reached 476 billion yen, a 58% increase year-over-year. This growth rate significantly outperformed the company's overall revenue growth (+37%) and even surpassed the overall growth rate of the SSD and storage business (+40%).
Morgan Stanley believes this data supports two important judgments:
- First, storage price increases in the quarter ending March 2026 have already spread to the consumer end. Previously, the market's focus was predominantly on the demand pull from data center clients. However, the accelerated growth in Apple's orders indicates that the consumer electronics sector has also experienced substantial price hikes, with Kioxia implementing significant price increases for consumer clients as well.
- Second, there is evidence of Apple engaging in pull-in procurement. Against the backdrop of continuously strengthening expectations for rising storage prices, Apple likely conducted pull-in procurement of components to lock in lower costs or ensure supply security. This behavior itself is a direct manifestation of the "pre-positioning" logic across the entire supply chain.
Looking at historical data, Apple's share of Kioxia's revenue has jumped from approximately 18% in the fiscal year ending March 2024 to about 20% this fiscal year, with the absolute amount rising sharply from roughly 301 billion yen to 476 billion yen.
It is worth noting that two major clients disclosed in the annual report for the fiscal year ending March 2025—SanDisk and Dell—are no longer listed separately in this year's report as their revenue share fell below the 10% threshold. SanDisk's revenue was already disclosed in the quarterly report as 193.4 billion yen (-3% year-over-year).
Raw Material Inventory Surges: The Entire Supply Chain Pre-Stocks for the Next Round of Price Hikes
Morgan Stanley believes Kioxia's inventory data reveals another key signal.
As of the end of March 2026, Kioxia's finished goods and work-in-progress inventories were largely flat compared to the previous year, but raw material inventory showed a significant increase.
Morgan Stanley judges that this change is likely due to the early procurement of DRAM used in SSDs. DRAM is a crucial raw material for SSD production. During an upcycle in storage prices, locking in raw material supply in advance is a rational choice for manufacturers.
This change in inventory structure echoes Apple's pull-in procurement behavior—from terminal brand companies to storage manufacturers, the entire supply chain is positioning itself in its own way, betting on the continued rise in storage prices.
In terms of total inventory, Kioxia's total inventory at the end of the fiscal year ending March 2026 reached 412.6 billion yen, up from 352.9 billion yen in the fiscal year ending March 2025, with the increase in raw material inventory being the most prominent.
Shift in Capital Expenditure Structure: From "Building Plants" to "Installing Equipment," BiCS-8 Ramp-Up Accelerates
The report points out that Kioxia's capital expenditure structure underwent a significant shift this fiscal year, directly reflecting the company's transition from the capacity-building phase to the equipment investment and production ramp-up phase.
FY3/25 (Previous Fiscal Year): In tangible fixed assets, transfers-in for buildings and structures amounted to 109.9 billion yen, while transfers-in for machinery and equipment stood at 192.7 billion yen, indicating large-scale investment in plant and infrastructure for projects like the K1 factory.
FY3/26 (Current Fiscal Year): Transfers-in for buildings and structures plummeted to 6.2 billion yen, while transfers-in for machinery and equipment rose to 259.8 billion yen. Morgan Stanley believes this clearly indicates that the focus of capital expenditure has shifted decisively towards BiCS-8 front-end wafer fabrication equipment at the Yokkaichi and K1 factories.
Looking ahead to FY3/27 (Next Fiscal Year), Kioxia plans capital expenditure of 450 billion yen, an increase of 166 billion yen year-over-year. Morgan Stanley judges that while there might be some cleanroom construction investment within existing plants, the primary direction will still be front-end equipment investment for BiCS-8 and BiCS-10.
This capital expenditure path clearly indicates that Kioxia is fully committed to building mass production capabilities for next-generation NAND flash memory technology, preparing the supply side for the upcoming demand peak.
Morgan Stanley maintains its "Overweight" rating on Kioxia with a target price of 110,000 yen, representing approximately 19% upside from the current stock price (around 92,290 yen as of the close on June 23, 2026). It also lists Kioxia as a Top Pick in the Japanese semiconductor sector.
Morgan Stanley uses the expected free cash flow (FCF) yield of approximately 10% for FY3/28 as a valuation anchor, believing this level provides ample support for the stock price. The implied price-to-earnings ratio based on the FY3/28 EPS forecast is 11 times.
