[Chiptalk] "Surplus Even After Covering Deficit"... Samsung and SK Expecting 23 Trillion Won in Revenue

Samsung Electronics' Semiconductor (DS) division and SK Hynix are expected to have a combined operating profit exceeding 20 trillion won this year. This level surpasses even the losses incurred last year. The rebound in memory prices, driven by a rapid reduction in inventory?the main cause of the semiconductor downturn?has contributed to this. The two companies, having regained pricing power, are anticipated to see explosive growth in their earnings.

According to industry sources on the 7th, the annual operating profit forecast for Samsung Electronics' DS division this year is estimated at 13 to 15 trillion won, while SK Hynix is expected to reach around 8.5 trillion won. This contrasts sharply with the losses recorded up to the third quarter of last year, where Samsung Electronics and SK Hynix posted deficits of 12.69 trillion won and 8.0763 trillion won, respectively.

The heightened expectations for earnings recovery stem from the resolution of the previous memory oversupply and the gradual market recovery as prices rise due to demand recovery. Over the past two years, global economic downturns slowed consumption, leading to semiconductor inventory accumulation at manufacturers, which in turn caused both semiconductor prices and sales to shrink. Consequently, most global semiconductor companies initiated production cuts, and the effects of these cuts are now gradually becoming apparent.

According to market research firm DRAMeXchange, as of December last year, the fixed transaction price for PC DRAM general-purpose products (DDR4 8Gb 1Gx8) rose to $1.65, marking three consecutive months of increase since September ($1.30). NAND flash prices also continued their upward trend. The average fixed transaction price for NAND flash general-purpose products (128Gb 16Gx8 MLC) in December was $4.33, the highest since August 2022 ($4.42).

Analysts suggest that memory companies have regained pricing power as suppliers. In particular, DRAM entered a supply shortage phase at the end of last year, and NAND distribution inventory has sharply decreased, leading to forecasts of significant price surges this year. Samsung Electronics is reportedly raising DRAM supply prices by up to 30% for major customers.

Memory semiconductor sales are also showing signs of recovery. According to market research firm TrendForce, global DRAM sales in the third quarter of last year increased by 18% compared to the previous quarter. By company, Samsung Electronics recorded a 15.9% sales increase, SK Hynix 34.4%, Micron 4.2%, Nanya 6.7%, and Winbond 9.8%. Global NAND sales in the third quarter also grew by 2.9%. Excluding Samsung Electronics, which maintained similar levels due to production cuts, companies like SK Hynix (11.9%) and WDC (13%) saw sales growth.

The growth of the generative artificial intelligence (AI) market and the surge in demand for High Bandwidth Memory (HBM) have also positively influenced market recovery. Both Samsung Electronics and SK Hynix have sold out their HBM3 production volumes for next year. Samsung Electronics plans to increase its HBM production capacity to 2.5 times the current level by next year.

The 'On-Device AI' trend, which integrates AI into devices, is also expected to be beneficial. Dongwon Kim, a researcher at KB Securities, stated, "As of January, Samsung Electronics and SK Hynix's DRAM and NAND shipments have exceeded previous expectations by more than double, driven by increased semiconductor inventory demand ahead of the launch of On-Device AI laptops and smartphones in the first half of this year." He added, "Starting this year, On-Device AI will create new demand across all industries, including memory semiconductors, PCs, smartphones, home appliances, and automobiles."

Researcher Kim explained, "Samsung Electronics and SK Hynix's semiconductor operating profits this year are expected to be 12 trillion won and 8 trillion won, respectively," adding, "Profit and loss improvements of 27 trillion won and 16 trillion won compared to the previous year are estimated solely in the semiconductor sector."

However, some voices caution that considering the global economic slowdown and the possibility of price declines due to increased semiconductor production, market expectations may be excessively high. Yooak Park, a researcher at Kiwoom Securities, noted, "Macro uncertainties remain, and the burden of absorbing increased supply during the memory upcycle persists," emphasizing, "At this point, more attention should be paid to the resolution of excess inventory, which had suppressed the previous market conditions."