JP Morgan Micron Research: New factory starts production ahead of schedule but can only meet half of the demand, with context window storage becoming a new growth point for NAND

Micron Technology executives sent a clear signal at the latest investor meeting: even if the new wafer fab starts production in 2027, the supply-demand tension for DRAM and HBM will still be difficult to resolve. According to the Wind Trading Desk, Micron's Chief Financial Officer Mark Murphy and Chief Business Officer Sumit Sadana reiterated at a recent investor meeting organized by JP Morgan that the company can currently only meet 50% to two-thirds of the mid-term demand from key customers. Even if the new Idaho 1 wafer fab in Idaho is set to begin mass production a quarter ahead of schedule in mid-2027, the ramp-up in capacity will be gradual, while demand continues to rise. This supply-demand imbalance will provide ongoing support for memory prices. According to JP Morgan's forecast, the average price of DRAM will increase by nearly 60% year-on-year in 2026. Micron's management stated that competitors' new capacities will not begin production until the end of 2027 and into 2028, and they also face physical limitations in ramping up capacity. JP Morgan believes that supply tightness will continue beyond 2026, supporting further price increases. Supply Gap Difficult to Bridge, New Capacity Ramp-Up Slow Micron's management revealed at the meeting that the first wafer output time for the Idaho 1 wafer fab has been advanced by about a quarter to mid-2027. However, management emphasized that the ramp-up in capacity for this new fab will be gradual, constrained not by capital but by physical conditions. Competitors' new capacities face similar challenges. JP Morgan pointed out that other manufacturers' new wafer fabs will not begin production until the end of 2027 and into 2028, and the ramp-up speed will also be limited. Meanwhile, memory demand continues to grow "upward and to the right." Micron is currently limited in meeting incremental customer demand due to a lack of available cleanroom space. However, through process node transitions, production efficiency improvements, and accelerated yield ramp-up, the company expects that DRAM and NAND bit shipments will grow by at least 20% in 2026. However, this growth rate will still not keep pace with demand growth—JP Morgan expects demand growth to exceed 30%. AI Application Demand Explodes, GPU and XPU Orders Continue to Be Upgraded Micron's management expressed a very optimistic view of the demand environment for DRAM and NAND, with customers continuously raising their memory and storage requirements. This trend has been particularly evident in the GPU and XPU markets in recent months. NVIDIA previously announced that the backlog of orders for its Rubin and Blackwell products exceeds $500 billion (covering until the end of 2026), and the company has indicated that orders are continuing to increase. Broadcom's TPU shipments are also on the rise. Earlier this week, JP Morgan raised its CoWoS capacity forecast, partly due to the expected increase in TPU shipments. Micron's management pointed out that even with new cleanroom capacity starting production in 2027, demand may continue to exceed supply. JP Morgan expects that this ongoing supply-demand tension will continue to support price increases at least through 2026, with the firm forecasting a nearly 60% year-on-year increase in the average price of DRAM in 2026. Context Window Storage Becomes a New Growth Point for NAND Micron's management stated that NVIDIA's announcement of a new inference context window storage platform at CES this week was not surprising. Other manufacturers, including large-scale cloud service providers with internal AI XPU infrastructure, have already deployed or are developing KV cache management systems to address the rapidly growing context window size and the need to offload data from HBM and system memory. Management believes this will open another channel for NAND bit demand growth, as NVIDIA's system configuration rate based on Bluefield-4 could be quite high. Importantly, Micron expects that KV cache offloading will not affect customers' HBM roadmaps for the next few years, which have already been established. Embodied Intelligence and Robotics Will Become a "Huge" Demand Driver In line with statements from manufacturers like NVIDIA and AMD at CES, Micron expects embodied intelligence (especially robotics) to become a "huge" demand driver for memory, following generative AI, and could account for a significant proportion of overall industry demand in the future. Management noted that customers' plans are "incredibly" large in scale and implied memory demand. For example, a leading humanoid robot uses up to 64-128GB of DRAM and 1-2TB of NAND (these numbers may increase in the future). When calculated at millions of units, this implies significant incremental demand for DRAM and NAND. JP Morgan maintains Micron's "Overweight" rating with a target price of $350, based on a profitability of $40 in 2026 and a price-to-earnings ratio of 8-12 times, which is consistent with the price-to-earnings multiples of memory stocks in the later cycle