Recently, Taiwanese memory chip manufacturer Winbond Electronics held an investor conference, delivering impressive results. According to reports, Winbond's gross margin reached a record high of 53.4% in the first quarter of this year, with net profit after tax reaching NT$10.1 billion and earnings per share of NT$2.25. The company also signaled a continued surge in prices in the second quarter, expecting profits to jump significantly again compared to the first quarter.
"Overall memory demand is extremely tight!" Winbond's General Manager, Chen Pei-ming, stated frankly. Driven by AI, memory prices will remain high in the second half of the year, and may even continue to rise. More importantly, the company's 2027 production capacity has already been fully booked by customers, demonstrating the booming market demand. Currently, Winbond has three main product lines: niche DRAM (including CUBE customized high-bandwidth memory products), SLC NAND Flash (single-level NAND flash memory), and NOR Flash (encoded external flash memory). These three product lines work synergistically to support the company's performance growth.
In the niche DRAM market, Winbond currently focuses on 20nm process technology, with products covering DDR4, LPDDR4, and DDR3. It plans to introduce 16nm process technology at its new Kaohsiung plant. However, Winbond does not plan to enter the DDR5 standard product market, but will prioritize LPDDR5 and DDR4 products, which are best suited for production costs, focusing on its core strengths.
Regarding SLC NAND Flash, Winbond is also actively expanding production, expecting a bit growth of 80% within one year. Chen Pei-ming pointed out that as major NAND manufacturers have gradually withdrawn from the 2D NAND market (including some SLC capacity), a significant market gap has emerged. High-density demand is shifting to 3D NAND, while low-density applications are turning to eMMC and SLC NAND, directly driving a significant increase in demand for related products. "The NAND shortage is truly intractable now," he emphasized. Against this backdrop, the gross margin of SLC NAND Flash is significantly better than that of NOR Flash, becoming an important source of profit for the company.
As for NOR Flash, although it has also started raising prices, its gross profit margin is still lower than that of SLC NAND. However, with competitors announcing unexpected price increases, Winbond will also follow suit and adjust its prices. With continued tight capacity, customers' acceptance of prices has increased significantly, with some even willing to raise prices to ensure supply, further supporting the upward trend in storage product prices.
AI is not only driving up demand but also completely reshaping the memory market structure. "The entire production capacity has been absorbed by AI, squeezed out of non-AI applications," said Chen Peiming. He added that current demand for personal computers is significantly weak, and the decline may be greater than initially expected, even reaching 20% to 30%. Therefore, Winbond has proactively adjusted its production capacity layout, shifting capacity originally used for PC-related applications to server and AI application areas to adapt to changes in industry demand.
However, Chen Peiming is not pessimistic about the future of the PC market. He believes that current demand is only being suppressed and delayed by price increases, not truly disappearing, and expects demand to rebound in about two years. Regarding capacity expansion, Winbond Electronics' board of directors has approved a plan to increase capital expenditure by NT$7.3 billion in 2027, of which NT$5 billion will be invested in CUBE customized high-bandwidth memory products. Simultaneously, the initial planning and design for the second phase of its Kaohsiung plant will commence. The current priority is to expand the capacity of the first phase of the Kaohsiung plant, with capital expenditure exceeding NT$40 billion this year. Monthly capacity is projected to increase from the current 15,000 wafers to 24,000 wafers by 2027, with a gradual transfer of DRAM production capacity from the Taichung plant to Kaohsiung.
"Over the past year, I haven't been chasing customers, but rather suppliers," Chen Pei-ming revealed. Tight equipment delivery schedules have become the biggest challenge in the company's expansion process, a common problem faced by the memory industry during expansion. It's worth noting that Winbond still holds some inventory available for sale. This inventory mainly comes from the initial mass production of the Kaohsiung plant in 2023, when approximately 120,000 wafers were produced, but only 20,000 were sold, with the remainder becoming inventory. All related inventory losses have been written off and reassessed, which has actually positively impacted short-term operations.
Regarding the product mix, it was initially estimated that CUBE would account for about 20% of DRAM revenue this year. However, the revenue from other DRAM products surged 3 to 4 times, diluting its share. Nevertheless, CUBE's development progress, shipments, and revenue are still in line with expectations. With the growth in demand for AI inference and the expansion of applications for various XPU chips, CUBE's development will be further driven, and its benefits will gradually become apparent in 2028. Addressing concerns raised by institutions, Chen Pei-ming stated that Winbond Electronics does not sell its products through the spot market and maintains strict control over its distribution system. Customers in mainland China rarely use Winbond's products, so the impact is limited. Long-term contracts currently account for a small percentage, but more customers are proactively requesting them. Winbond will reassess its long-term contract strategy after the equipment at its new Kaohsiung plant is in place.
