2026-09-03XQuote

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Just an update to my DDR2/DDR3 memory idea with ESMT. They reported August revenue (Taiwan sometimes does monthly reporting): June revenue: ~$153M July: ~$214M August (new): ~$249M vs. $35.3m (last year) Monthly revenue has increased ~63% in two months despite reportedly similar 2026 wafer allocations to 2025 (MoneyDJ report). The profitability is already really high as seen with July's monthly revenue (where they reported ~$109M net income). So if pricing holds, and revenue increases, that would be very nice... Now a lot of US people don't really care since it's in Taiwan, but if you're in the $MU / $SKHY, $SNDK trade. Just educational purposes, it's a second order effect where your leading memory players prioritize AI/DC higher end memory and reduce allocations to older generations (causing shortages). But... DDR4 since prices going up too much, so older gen memory products (DDR4) are getting redesigned with older gen memory (DDR3). And DDR3 products with DDR2. And so on. Causing cascading supply chain shortages. (DDR2 for example is boring/old memory used for cameras, printers, automotive back in the 2000s and not many ppl make them anymore). And even your old DDR2 suppliers like Winbond are gradually withdrawing from the market too... So ESMT is the beneficiary of DDR3/DDR2 shortages. TLDR: ESMT August revenue was ~$249M, up from ~$214M last month.

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I wanted exposure to DDR2/DDR3 bottleneck ongoing and found ESMT (3006). A $2.5B MC fabless company with PSMC wafer allocation (esp. focused on DDR2). Last month's net income was: $109.5M (July month), which annualized is $1.31B net profit (1.9x runrate P/E). If we look at net profit throughout the months tracking legacy DRAM price hikes: Jan 2026: ~$16M (est) Feb 2026: ~$17M Mar 2026: ~$31M (est) April 2026: ~$58M May 2026: ~$60M (est) June 2026: ~$67M (est) Jul 2026: ~$110M (Estimated months are inferred from reported quarterly totals. July is company reported) This earnings progression reminds me of $SNDK style price hikes + earnings inflection (esp. the report released this month). And I do expect DDR2/DDR3 capacity to remain constrained throughout 2027 (with legacy players like Winbond withdrawing from certain lines too like DDR2). It's not quite all inventory liquidation like the other peers. Sure lower cost inventory helped, but the primary driver seems to be the widening spread between wafer costs/supply and legacy dram ASPs? Their balance sheet is extremely solid as well: - Cash on hand: ~$395.9M net cash - $249.6M inventory, $146.3M receivables And the net income progression... is before further legacy DRAM hikes expected in Q3. *disclosure own positions, NFA It's always a bit daunting being early without much commentary around the idea. Wondering if anyone can stress test this thesis? Since a company that grew monthly net income from $16M -> $100m this year alone (July Annualized would be 1.9x P/E). And benefits from another projected wave of DDR2/DDR3 hikes this quarter... maybe like 35-40% for DDR2 lines per Trendforce, and DDR3 likely continuing to rise. Do markets just not know about this bottleneck/company or am I missing something from my research?
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