Samsung Electronics and SK Hynix are projected to enter an unprecedented era of 80% operating profit margins, driven by the significant profitability boost from the emergence of artificial intelligence (AI) technology. This shift marks a transformation of memory products from general-use items to a core high-value industry.
According to industry sources, Samsung Electronics will announce its third-quarter earnings on October 29, while SK Hynix will do so on October 28. Analysts expect the combined operating profit of both companies to surpass 185 trillion won, reaching the highest level in the history of South Korean manufacturing.
Samsung has reported strong performance in its semiconductor (DS) division. On October 8, the company disclosed preliminary results showing third-quarter revenue of 195 trillion won and an operating profit of 107.4 trillion won. It is estimated that the DS division contributed approximately 95 trillion to 110 trillion won to this profit. The operating profit margin for the DS division is expected to approach 80%, up from about 37% in the fourth quarter of last year. However, due to cost pressures in the mobile and consumer electronics (DX) divisions, the overall operating profit margin for the company is anticipated to be between 50% and 60%.
SK Hynix is also set to demonstrate its exceptional profitability. According to consensus estimates, SK Hynix's third-quarter revenue is projected to be around 98.5 trillion won, with an operating profit of approximately 79.6 trillion won. The expected operating profit margin is 80.8%, indicating that more than 80% of its revenue will be net profit.
The driving force behind this high profitability is attributed to the supply-demand imbalance for high-bandwidth memory (HBM) and high-capacity DDR5 for servers. Analysts suggest that the surge in demand for HBM and server SSDs from major tech companies, driven by the expansion of AI infrastructure, has shifted pricing power to suppliers.
Historically, the memory sector has been vulnerable to economic fluctuations, often resulting in low profit margins. The standardized nature of general-use products meant that a decline in demand would lead to price crashes and significant losses. However, with the advent of the AI era, memory products have emerged as key customized specifications for AI accelerators, successfully transitioning into a monopolistic high-value market.
Industry experts believe that the trend of ultra-high profitability in memory semiconductors will continue for the foreseeable future. Major manufacturers have already sold out their HBM production capacity for next year, and there is a time lag before investments in expanding supply lead to significant shipments.
Experts analyze that this earnings announcement will mark a historic turning point in the restructuring of South Korean manufacturing. An Gi-hyun, Executive Vice President of the Korea Semiconductor Industry Association, stated, "The memory industry has entered a qualitative growth phase where it determines yield and pricing beyond mere quantitative growth. This will serve as a moment to confirm the overwhelming market dominance of K-semiconductors in the global AI chip supply chain."
* This article has been translated by AI.
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