Kioxia has officially chosen discipline over aggressive expansion, even in the midst of a memory semiconductor boom.
The company announced it will invest an average of ¥470 billion annually from fiscal 2026 to 2028. While this is a 66% increase from the previous year, it's intentionally kept about 10% below the 2023 peak. At the same time, Kioxia aims to have 50% of its shipments covered by Long-Term Agreements (LTAs) by 2028. This dual strategy signals a clear shift from chasing market share at any cost to prioritizing stable profitability and managing risk.
So, why this cautious approach when NAND prices are skyrocketing? The answer lies in painful past experiences. First, the immediate market environment is incredibly strong. NAND contract prices soared by 70-75% in the second quarter of 2026, driven by intense demand for AI servers and data centers. Kioxia even briefly became Japan's most valuable company by market capitalization, which paradoxically strengthens the case for discipline; reckless investment could quickly destroy this newly earned shareholder value.
Second, and more importantly, Kioxia has learned a harsh lesson. The company made a massive ¥1 trillion investment decision in 2022, right before the market demand froze, leading to five consecutive quarters of losses and severe production cuts of over 30% through 2024. The memory of this downturn, or 'eligibility trace,' is the primary force compelling them to avoid repeating the same mistake. They are determined not to get carried away by the current upcycle.
Finally, the industry structure itself is facilitating this disciplined approach. The rise of AI has led major customers, especially cloud service providers, to seek stability. They are increasingly signing multi-year LTAs to secure a steady supply of NAND for their infrastructure. This trend gives Kioxia unprecedented visibility into future demand and revenue, allowing for more efficient and predictable investment planning without the need for speculative expansion.
This disciplined stance from a major player like Kioxia has positive ripple effects for its Korean competitors. With Kioxia controlling its output, the supply-demand balance remains tight, which helps support NAND prices and improves the profitability of Samsung Electronics and SK hynix. Moreover, as SK hynix is part of the consortium that owns a stake in Kioxia, Kioxia's rising corporate value directly translates to an increase in the value of SK hynix's investment.
- Capex (Capital Expenditure): Investments made by a company in acquiring, maintaining, or upgrading physical assets like buildings, equipment, and technology.
- LTA (Long-Term Agreement): A multi-year contract between a supplier and a customer to provide a specified quantity of goods at a predetermined price or pricing formula, ensuring supply stability.
- Eligibility Trace: A concept from reinforcement learning, here used metaphorically to describe how the memory of a past painful event (like a market crash) influences current decision-making, with its impact decaying over time.