Cathay Haitong: Google's TurboQuant compression technology does not change the current storage shortage situation; long-term contracts and capacity expansion are the main trends

Cathay Securities and Haitong Securities released research reports stating that storage is a cyclical industry. Historically, the boom-bust cycle usually lasts 3-4 years, which is also why global manufacturers have recently been actively signing long-term contracts. Google’s TurboQuant memory compression technology has disrupted the market, but in the short to medium term, it does not change the industry trend of storage shortages. First, current manufacturer capacity is nearly fully booked, especially for servers. Second, Google’s algorithm only targets inference processes and is based on laboratory data. Even if implemented, it does not mean demand will shrink; instead, the reduced inference costs could open up a larger market space.

Cathay Securities and Haitong Securities’ main viewpoints are as follows:

Storage: Hedging cycle fluctuations with long-term contracts, expanding capacity to seize the boom cycle

Beiwei Storage announced a $1.5 billion long-term contract, with delivery evenly distributed over 8 quarters from Q2 2026 to Q1 2028, locking in prices throughout to hedge against price volatility.

Google launched TurboQuant memory compression algorithm, but it does not alter the trend of storage shortages. The core reasons are: first, current manufacturer capacity is nearly fully booked, especially for servers; second, Google’s algorithm only targets inference and is based on lab data. Even if implemented, it does not mean demand will shrink; instead, lower inference costs could open up a larger market.

Kioxia, SanDisk, SK Hynix’s Solidigm, and Cisco have subscribed to a private placement of 17.2 billion RMB by South Asia Technology to lock in future DRAM supply.

Logic: US technological blockade intensifies

On March 27, the U.S. officially passed the “CHIPS and Science Act,” requiring some advanced semiconductors under export controls to be equipped with “chip security mechanisms,” including position verification functions. The law aims to ensure controlled chips do not “bypass” into China through technical means.

Wafer foundry packaging and testing: Three major wafer foundries disclose 2025 annual reports

SMIC achieved operating revenue of 67.32 billion RMB in 2025, up 16.5%; net profit attributable to parent was 5.04B RMB, up 36.3%; basic earnings per share were 0.63 RMB; gross margin was 21.0%, up 3.0 percentage points year-on-year. Average annual capacity utilization was 93.5%, an increase of 8 percentage points.

Hua Hong Semiconductor achieved operating revenue of 17.29B RMB in 2025, up 20.18%; net profit attributable to parent was 377 million RMB; operating net cash flow was 5.07B RMB, up 40.38%. Overall capacity utilization reached 106.1%.

JCET Group achieved operating revenue of approximately 10.89B RMB in 2025, an increase of 17.69%; net profit attributable to parent was 704 million RMB, up 32.16%; basic earnings per share were 0.36 RMB, up 33.33%.

Semiconductor Equipment: Orders surge, industry benefits

SK Hynix signed a semiconductor equipment contract worth 81.56 billion KRW with Korea’s only etching equipment supplier VM, equivalent to 116% of VM’s total 2024 revenue. VM’s related orders from SK Hynix and other memory manufacturers have accumulated to 224.6 billion KRW. Wafer bonding company Qinghe Jingyuan completed a strategic financing of 500 million RMB, led jointly by Microchip Technology and Futeng Capital, with BAIC Investment participating; existing shareholder InnoFund continued to increase investment.

Risk Warning

Terminal demand fluctuations exceeding expectations, international technology restrictions exceeding expectations.