If Micron (MU) reports in its first fiscal quarter in mid-to-late December that memory chip contract prices have turned to decline, which item of Longsys (301308) will deteriorate first in its 2026 annual report—inventory write-down provisions, or gross margin?

If Micron (MU) reports in its first fiscal quarter in mid-to-late December that memory chip contract prices have turned to decline, which item of Longsys (301308) will deteriorate first in its 2026 annual report—inventory write-down provisions, or gross margin?

What deteriorated first was gross margin. And there is no need to wait for Micron's December earnings report — it was already deteriorating.

In Jiangbolong's 2026 third-quarter report, the single-quarter gross margin fell from 61.3% in the second quarter to 44.7%, a drop of 16.5 percentage points in one quarter. In the same quarter, inventory write-down provisions were only 0.72 yi yuan. Putting these two things together gives the shape of the answer: granularity prices had not yet turned down, but gross margin collapsed first.

Break the three quarters apart

Cumulative revenue for the first three quarters was 387.18 yi yuan, and operating cost was 179.84 yi yuan. Subtracting the two cumulative figures gives the single quarters: first-quarter revenue 99.09 yi yuan, gross margin 55.5%; second quarter 141.80 yi yuan, 61.3%; third quarter 146.30 yi yuan, 44.7%.

Third-quarter revenue was only 3.2% higher than the second quarter, but operating cost jumped from 54.93 yi yuan to 80.84 yi yuan, up 47.2%. Revenue barely moved while cost rose by nearly half — this was not caused by a decline in selling price; cost caught up.

Module makers' inventory is carried forward on a weighted-average basis. During a price upcycle, the cost first allocated is cheap material bought several months earlier, and book gross margin is pulled very high by the time lag; once the cheap material is used up and material replenished at high prices starts being carried forward, gross margin moves down. That 61.3% in the second quarter was not operating capability; it was the timing dividend of inventory.

The size of inventory shows how big this account is

At the end of 2025 it was 116.78 yi yuan, at the end of March 2026 it was 179.61 yi yuan, at the end of June it was 257.77 yi yuan, and at the end of September it was 284.56 yi yuan. Over nine months it increased by 167.78 yi yuan, an increase of 144%. At the end of September, the book balance of inventory was 285.85 yi yuan, equivalent to 3.5 times the third-quarter single-quarter operating cost of 80.84 yi yuan, or about 320 days (estimate). And at the end of 2024 this company's inventory was only 78.33 yi yuan.

Where the money came from also left traces: net assets at the end of the third quarter were 311.76 yi yuan, 126 yi yuan more than 185.83 yi yuan at the end of the second quarter, while net profit for the quarter was only 37.45 yi yuan; the difference mainly came from equity financing — the batch of announcements on October 30 included "use of A-share raised funds to replace self-raised funds previously invested in fundraising projects," and on October 8 there was an announcement on the lapse of the H-share over-allotment option.

Why the write-down provision has not moved yet

The October 30 "Announcement on Provision for Credit Impairment Losses and Asset Impairment Losses for January-September 2026" laid out the bottom line. The opening balance of inventory write-down provisions was 0.76 yi yuan, 1.98 yi yuan was newly provided in the first three quarters, 1.45 yi yuan was reversed out because inventory was sold, and the closing balance was 1.30 yi yuan. Against the 285.85 yi yuan book balance of inventory, the provision ratio was 0.45%.

The same announcement stated the method: by individual inventory item, the difference where cost exceeds net realizable value. This sentence is the key. The write-down provision is not "provided once prices fall"; it is provided only when "the cost of this inventory item is already higher than the money it can currently sell for." The 285.85 yi yuan of inventory mixes material bought in 2025 with material replenished at high prices in the second and third quarters of 2026; to trigger it, each item must fall through its own cost line one by one.

There is another detail: that 1.45 yi yuan reversal was deducted from operating cost. In other words, the 179.84 yi yuan cost for the first three quarters had already deducted this amount, and gross margin was raised by about 0.4 percentage points (estimate). The true operating gross margin is a little lower than what is on the report.

In the last downcycle, this company performed the same play itself

Gross margin was 20.0% in 2021, 12.4% in 2022, and 8.2% in 2023. The corresponding asset impairment losses were 0.64 yi yuan, 1.62 yi yuan, and 3.56 yi yuan. Prices turned in 2022, and gross margin fell 7.6 percentage points that year; the write-down provision that year only rose from 0.64 yi yuan to 1.62 yi yuan. The real expansion to 3.56 yi yuan, which drove the full year into a loss of 8.28 yi yuan, came in 2023.

Gross margin moves first; the write-down provision moves the following year.

Micron's 8-K has in fact already handed over the same knife

The September 30 earnings release: fourth fiscal quarter revenue 542.29 yi US dollars, gross margin 86.8%; first fiscal quarter guidance revenue 615 yi ± 15 yi US dollars, gross margin 85.95%. Revenue guidance is only 13.4% higher than the prior quarter, while the implied operating cost must rise from 71.82 yi US dollars to 86.42 yi US dollars, up 20.3%. Cost rising faster than revenue — these are the two numbers it gave itself.

Inventory rose from 85.67 yi US dollars to 103.72 yi US dollars, and inventory days were pulled from 121.8 days to 131.4 days (estimate). The fixed portion of cost is very rigid: of the 71.82 yi US dollars of operating cost in the fourth fiscal quarter, 26.41 yi US dollars was depreciation, accounting for 37%, amortized from capital expenditure over the years — capital expenditure (net) in fiscal 2026 alone was 273.7 yi US dollars, and if prices fall this portion will not fall with them.

In the October 9 10-K, the inventory structure was "finished goods share down, work in progress and raw materials up": finished goods 9.58 yi US dollars, 9.2% share, versus 10.94 yi US dollars, 13.1%, at the end of the prior fiscal year; work in progress 82.52 yi US dollars, up 28.9%; raw materials 11.62 yi US dollars, up 35.1% (the 10-K has only two annual time points, no quarterly figures). This is stockpiling materials, not finished-goods accumulation.

Upstream costs are still pushing higher, so the room it can offer for price cuts is very narrow; once contract prices actually turn down, what collapses first is its own gross margin, and only then does it get to lowering its quotes to downstream.

There is a pitfall in how this is read that needs to be made clear

The full-year gross margin in the 2026 annual report is locked in by the 53.6% for the first three quarters. Calculated on the basis that fourth-quarter revenue is flat with the third quarter (146.30 yi yuan), even if the fourth-quarter single-quarter gross margin drops to zero, the full year still has about 38.9% (estimate); if it drops to 30%, the full year is about 47% (estimate). So the matter of "gross margin deteriorating first" cannot be seen in the 2026 annual report by looking at the full-year number; you have to back out the fourth-quarter single quarter by subtracting the first three quarters from the full year. And the inventory write-down provision is an amount recognized within the year; whatever is provided in the fourth quarter is added directly on top of the 1.98 yi yuan from the first three quarters.

Incidentally: Jiangbolong is not in the A-share key pool you gave, so I did not give its price change. On the US side, the four storage names fell together — Micron -15.36%, Western Digital -15.78%, Seagate -15.39%, SanDisk -19.70%.

The strongest counterpoint: at the end of September, Jiangbolong's write-down provision balance was only 1.30 yi yuan, a provision ratio of 0.45% — that base is absurdly low. On its October 29 conference call it said "a considerable portion of inventory has already been locked in by globally renowned customers through prepayments" — if what is locked is the price and not just the volume, the net realizable value of this batch of goods is supported by contracts, and the write-down provision really would not move first. But pushing the reverse inference harder: with such a low base, it means that in the 2026 annual report, as long as the provision ratio is raised from 0.45% to 5% (about 14.3 yi yuan, 7 times the amount provided in the first three quarters), the asset impairment loss line jumps from 1.98 yi yuan to over ten yi yuan, an explosive year-on-year change; while the full-year gross margin is smoothed out by the first three quarters and still looks like 47%. If "deteriorating first" means the number readers see first when they open the annual report, the answer is the write-down provision, not the gross margin. I accept this point — which is why I said "first", not "big".

What would count as me being wrong: two things, either one counts. First, the fourth-quarter single-quarter gross margin in the 2026 annual report (backed out as full year minus first three quarters) is not lower than the third quarter's 44.75% — that would show costs have stopped catching up, and the transmission direction I described is wrong. Second, the full-year inventory write-down provision in the 2026 annual report exceeds 15 yi yuan (equivalent to raising the provision ratio from 0.45% to above 5%), while the fourth-quarter single-quarter gross margin is still above 45% — that would show the provision has run ahead of the gross margin, and the order is reversed.

Source:

• Micron Technology, 8-K, 2026-09-30, accession 0000723125-26-000018, exhibit EX-99.1 (a2026q4ex991-pressrelease.htm): fourth quarter and full year results for fiscal 2026, and guidance for the first quarter of fiscal 2027. https://www.sec.gov/Archives/edgar/data/723125/000072312526000018/a2026q4ex991-pressrelease.htm
• Micron Technology, 10-K, 2026-10-09, accession 0000723125-26-000023 (mu-20260903.htm): composition of inventory of finished goods/work in process/raw materials, non-current contract liabilities of 128.95 yi USD.
• Micron XBRL companyfacts, CIK 0000723125: inventory and quarterly cost of revenue series, used for inventory turnover days.
• Longsys, 2026 third quarter report, 2026-10-30, CNINFO annoId 1225644948.
• Longsys, "Announcement on Provision for Credit Impairment Losses and Asset Impairment Losses for January-September 2026", announcement no. 2026-127, 2026-10-30, annoId 1225644957: beginning and ending balances of write-down provisions, amounts provided and written off, and the method of providing by individual inventory item.
• Longsys, investor relations activity record no. 2026-013 (2026-10-29 conference call, disclosure date 2026-11-02), annoId 1225653730: inventory locked in by customer prepayments, wafer prices at a high level.
• Longsys, investor relations activity record no. 2026-012 (2026-10-27 research visit, disclosure date 2026-10-29), annoId 1225643244: stockpiling procurement strategy, operating cash flow turned positive in the third quarter.
• Financial series: tushare Pro income / balancesheet, 301308.SZ, reporting periods 2021-12-31 to 2026-09-30; cross-checked against the Sina Finance three-statement interface, with two places consistent: 2026-09-30 operating revenue 38,718,231,824.00 yuan, operating cost 17,983,801,326.82 yuan, asset impairment loss -198,477,261.07 yuan.
• Market price changes come from the U.S. stock same-day data provided by the questioner.