Samsung, SK hynix to post record Q1 profits with blockbuster earnings still to come

Samsung Electronics flag, left, and SK hynix's Icheon headquarters in Gyeonggi [YONHAP]

 
Analysts project nearly 70 trillion won ($46 billion) in combined first-quarter profits for Samsung Electronics and SK hynix, the world’s two largest memory makers, saying the record-breaking performance is merely a prelude to even bigger earnings in the upcoming quarters this year.
 
Samsung Electronics is expected to post 38.1 trillion won in operating profit on revenue of 117 trillion won, while SK hynix is forecast to record 31.6 trillion won in operating profit and 46.6 trillion won in revenue, based on the FnGuide market consensus.
 
Samsung Electronics is scheduled to announce its preliminary earnings on Tuesday, which will include combined results from its smartphone, household appliance and semiconductor businesses, with the semiconductor segment expected to be the primary driver. In contrast, SK hynix does not provide preliminary guidance, and its reported earnings are derived solely from its semiconductor operations.
 
That is nearly a sixfold surge in operating profit for Samsung and a more than fourfold rise for SK hynix compared to the same period last year. Analysts say the companies are moving decisively into a semiconductor upcycle, as projected quarterly profits near full-year levels.
 
The strong performance is largely attributed to rising memory prices, as supply shortages have expanded from dynamic random access memory (DRAM) to NAND flash, pushing up average sales prices (ASPs). NAND prices, in particular, have tightened rapidly since last year.
 
Conventional DRAM bit growth, which refers to the total number of memory bits shipped, increased 4 percent on quarter while ASP surged 62 percent, according to Mirae Asset Securities. NAND bit growth grew 8 percent during the same period, with ASP climbing 53 percent.
 
On the demand side, increased capital expenditure by North American cloud service providers for data center expansion has played a crucial role. Shipments of high-performance chips, such as high bandwidth memory (HBM), are being absorbed by AI data center customers, while emerging applications such as edge AI and smart robotics are expected to further boost demand.
 
Market consensus points to a steady buildup in profitability through the end of the year. Samsung Electronics' operating profit is forecast at 51.45 trillion won for the second quarter, rising to 59.7 trillion won in the third and 62.2 trillion won in the fourth, while SK hynix is expected to post 41.6 trillion won, 47.7 trillion won and 50 trillion won, respectively. 
 

[KOREA JOONGANG DAILY]

 
Analysts cite U.S. customers' shift toward long-term supply agreements, even amid sustained increases in memory prices, as a key driver of earnings momentum. 
 
KB Securities has set the highest target prices for both companies, at 320,000 won for Samsung and 1.7 million won for SK hynix. The firm estimates that capital spending on AI by four major U.S. tech companies — Amazon, Alphabet, Meta and Microsoft — surged 76 percent year-on-year to 1,000 trillion won, driving demand for AI semiconductors.
 
“Second-quarter price negotiations have recently begun, and major customers are prioritizing stable supply despite the sharp price increases seen in the first quarter,” said KB Securities analyst Kim Dong-won. “Leading Big Tech firms are competing to secure mid- to long-term memory supply by offering large upfront payments and including penalty clauses to secure three to five-year contracts.”
 
Both chipmakers are ramping up capital investment to expand HBM wafer production capacity this year. Samsung plans to allocate at least 110 trillion won in capital expenditure, including research and development, in 2026, a record high for the company as it has never exceeded 100 trillion won in this area before. SK hynix has not disclosed a specific figure but said it plans to "significantly increase" spending compared to its 2025 level of 30.17 trillion won. 
 
Meanwhile, Samsung’s contract chip manufacturing division is still expected to post an operating loss of about 1 trillion won ahead of full production ramp-up. The company plans to begin manufacturing Tesla’s AI5 chips next year at its Taylor facility and is currently producing Groq’s AI chips, which will be integrated into Nvidia’s Vera Rubin platform, with shipments scheduled to start in the third quarter of this year.
 
Despite the strong earnings outlook, shares of both chipmakers have come under pressure due to geopolitical uncertainties surrounding the Iran war and fears that Google’s AI efficiency algorithm, TurboQuant, may drastically reduce memory demand.
 
"We view the success of OpenAI's listing, rather than TurboQuant, as the key variable to meaningfully impact the memory semiconductor industry," said Roh Geun-chang, head of Hyundai Motor Securities' research center. "If OpenAI's fund-raising proceeds smoothly, favorable supply-demand conditions are likely to continue through 2027."
 
Samsung Electronics and SK hynix reached record highs on Feb. 26 with 228,500 won and 1.09 million won, respectively. As of Friday, shares fell 18.5 percent and 20.3 percent from those peaks. 
 

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]