Winbond's Earnings Call: Q3 Memory Prices and Volumes Continue to Rise, Targeting Over 50% Operating Margin, Warns of Tighter Supply Next Year

Winbond Electronics (2344-TW) held its earnings conference today. Looking ahead to the third quarter, CEO Chen Pei-ming expressed optimism that DRAM and Flash prices will continue their upward trend. Although average DRAM selling prices are unlikely to double as they did in Q2, constrained supply, robust AI demand, and ongoing product mix optimization are expected to sustain strong operations, with the company targeting an operating margin exceeding 50% in Q3—up from 48.4% in Q2.

Chen stated that the DRAM market remains in a "very tight, very tight" state. Prices have continued rising into August, and while a 100% sequential increase in average bit selling price is not expected, the overall upward trajectory from Q2 is expected to persist.

Chen further believes that DRAM supply in 2027 could be tighter than in 2026, driven by sustained growth in AI data center demand, major international manufacturers shifting capacity toward HBM, DDR5, and LPDDR high-end products, and a gradual contraction in mature DRAM supply.

On the demand side, the market shows clear polarization. Some consumer electronics customers, facing rising memory costs, are requesting downgrades—from 4Gb to 2Gb or 8Gb to 4Gb—while AI-related clients are upgrading specifications, seeking to move from 8Gb to 16Gb.

Winbond will prioritize long-term demand from AI, data centers, networking, automotive, and infrastructure sectors, maintaining stable operations and profitability through supply allocation, product conversion, and long-term contracts.

In terms of applications, AI servers continue to drive NOR Flash demand. Winbond estimates that next-generation AI server racks may require 500 to 600 NOR Flash chips per system, with capacities ranging from 64Mb to 2Gb. The 512Mb variant is the most prevalent, and Winbond’s market share could reach 40–50%.

Since switches, power supplies, cooling systems, network management, and control boards within AI racks all require NOR Flash, increasing system complexity is boosting both per-unit chip count and capacity.

Winbond maintains a leading global position in the NOR Flash market. Management noted that despite tight supply and some competitors aggressively raising prices, the company, considering its market leadership and share objectives, will not adopt overly aggressive pricing strategies but will adjust prices moderately in line with the market.

SLC NAND is another key growth driver for Q3 and the coming years. Benefiting from some suppliers exiting the 2D NAND and SLC NAND markets, along with growing demand from AI, automotive, industrial control, low-earth orbit satellites, robotics, drones, and wearables, SLC NAND supply remains tight.

Winbond estimates that around 15% to 20% of 4GB and 8GB eMMC applications in the market could transition to SLC NAND in the future by reducing program code size, further expanding demand.

The company currently holds about 15% global market share in SLC NAND and expects this to continue rising this year. It aims to become the world’s largest SLC NAND supplier within the next one to two years and anticipates sustained bit and unit shipment growth through 2028.

On process improvements, Winbond’s 16-nanometer DRAM yield is approaching 80%, with a goal to reach nearly 90% by year-end. As the share of 16nm products increases, higher-capacity products gain weight, and capacity utilization remains full, these factors are expected to push Q3 operating margins beyond Q2’s ~48% to over 50%.

Additionally, DRAM cache for enterprise SSDs will become a new growth engine next year. While related products are still in small-volume sampling, Winbond forecasts they could account for about 10% of total DRAM revenue by 2027 and may scale up rapidly through long-term supply agreements.