"Both Companies Expected to Achieve Record Results Next Year"
On September 30, KB Securities stated, "The increase in profitability due to the shortage of DRAM semiconductors will drive overall performance improvement for Samsung Electronics and SK Hynix," adding, "There is ample room for further share price growth for these companies."
On this day, KB Securities noted, "Next year, Samsung Electronics is expected to achieve its highest operating profit in eight years since 2018, and SK Hynix is projected to once again set a new record for operating profit."
According to the report, as the recent DRAM supply shortage has intensified, Samsung Electronics and SK Hynix are delaying volume contracts with customers for the fourth quarter. This is attributed to North American cloud companies significantly increasing their large-capacity memory orders. As of this month, the average inventory level among the three global DRAM manufacturers is around three weeks, which is a 33% decrease compared to early July (five weeks), falling well below the appropriate inventory level. This situation is expected to persist into the fourth quarter, with the supply-demand imbalance continuing.
The report also projected that the DRAM supply shortage will continue next year. KB Securities explained, "Next year, DRAM demand is expected to grow by 17%, outpacing the production growth rate of 15%," and pointed out, "The expansion of general-purpose memory production capacity is limited, new capacity expansion is focused on high-bandwidth memory (HBM), and demand centered on artificial intelligence (AI) data centers is spreading across all memory segments, including server DRAM, GDDR7, LPDDR5X, and eSSD." Additionally, the possibility that the entry of Chinese company CXMT into the DDR5 market may be delayed compared to previous expectations is also expected to impact demand growth.
Under these conditions, next year’s operating profit for Samsung Electronics is estimated to increase by 66% year-on-year to 53.4 trillion won, while SK Hynix’s operating profit is expected to rise by 43% to 56 trillion won. The combined operating profit of the two companies is projected to reach 109.4 trillion won, representing a 53% increase compared to the previous year. In particular, the increase in operating profit in the DRAM sector is expected to drive the overall performance improvement. Samsung Electronics’ DRAM operating profit is forecast to rise by 58%, and SK Hynix’s by 39%.
KB Securities assessed, "Despite the recent share price increases for both companies, considering that they are entering a full-fledged profit growth trajectory, there is still ample room for further upside."
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