DRAM Supercycle Returns: Profit Gap Widens Among Top 3
As the storage semiconductor growth cycle officially begins, only Samsung Electronics, SK Hynix, and Micron Technology, the leading DRAM companies, appear poised to benefit. However, this expectation may face challenges. The market generally anticipates Samsung and SK Hynix will achieve record-breaking operating profits of 25 trillion to 30 trillion Korean won (approximately 131.58 billion to 157.90 billion RMB) this year. In contrast, Micron, due to insufficient investment in high-bandwidth memory (HBM) DRAM capacity, is projected to earn around 5 trillion won (approximately 26.32 billion RMB).
According to semiconductor and securities industry reports from June, with the start of this year's storage semiconductor supercycle, Samsung and SK Hynix are expected to widen their profit gap with Micron Technology. Samsung Electronics and SK Hynix are forecasted to significantly increase their operating profits, enjoying the upcoming "storage spring." The securities industry predicts that Samsung Electronics' DS division's operating profit will reach 25 trillion to 27 trillion won, possibly even approaching 30 trillion won. In the first quarter, Samsung's DS division achieved nearly 2 trillion won in profit, and the second quarter is expected to record 6 trillion to 7 trillion won in profit. With a comprehensive rebound in general storage prices in the second half of the year, profits are expected to increase further.
Market research firm TrendForce predicts that the average selling price (ASP) of DRAM will increase by 8% to 13% in the third quarter of this year, with NAND prices rising by 5% to 10%. SK Hynix is also expected to deliver its best-ever performance. Last year, SK Hynix suffered a loss of over 77 trillion won, but this year it is forecasted to achieve an operating profit of over 21 trillion won for the full year, with a common view in the securities industry that its profit could increase to 25 trillion won. If realized, this would surpass the 20.84 trillion won profit during the 2018 storage semiconductor supercycle. SK Hynix's exceptional performance this year is expected to be driven by HBM. SK Hynix was the first among the three companies to decide to supply HBM3E to its largest customer, NVIDIA, and start mass production. HBM3E's performance is expected to be reflected in the second half of the year's results, contributing significantly to the operating profit growth.
Despite the improved storage market conditions, Micron Technology is expected to be the only company unable to enjoy the boom. Using different accounting standards and fiscal years compared to Samsung and SK Hynix, Micron recorded significantly higher profits in the second (December 2023 to February 2024) and third quarters (March to May 2024) of its GAAP fiscal year compared to the same period last year, but these remain insignificant compared to its competitors. If evaluated under the same accounting standards as Samsung and SK Hynix, the securities industry predicts Micron Technology will record operating profits of 5 trillion to 6 trillion won this year. Although this is nearly double the 7 trillion won operating loss of the previous year, this year's earnings may still struggle to offset last year's losses.
Despite Micron's enthusiasm and proactive push in HBM, this strategy has negatively impacted its performance. Compared to Samsung and SK Hynix, Micron's production capacity is insufficient, and prioritizing HBM production lines has sharply reduced general product production capacity, making further investments difficult and creating a vicious cycle. If the profit gap between the three storage giants widens to over 20 trillion won (approximately 105.27 billion RMB) this year, an even larger gap during the future supercycle is inevitable, potentially jeopardizing Micron Technology's survival.
Samsung and SK Hynix are expected to reinvest most of this year's profits into expanding production capacity and equipment investment. With the surge in demand for artificial intelligence (AI) and general storage, there is a supply shortage in prioritized HBM and other product lines, making this year's investment not only necessary but also crucial for survival. However, during this process, financially weaker Micron Technology faces a crisis. Micron is currently building a next-generation HBM R&D center and production plant in Idaho, USA, and is considering establishing an HBM production plant in Malaysia, but the feasibility of these plans remains uncertain.
Nevertheless, under the announced US CHIPS Act, Micron Technology will receive a $6.1 billion subsidy, making it the fourth-largest recipient of incentives after Intel, TSMC, and Samsung Electronics.
