In the fourth quarter of last year, SK hynix is expected to achieve record performance, but it is forecasted that the high-flying momentum will be curtailed in the first half of this year due to weak demand for general-purpose DRAM and NAND flash. Starting from the first quarter of this year, sales of the latest High Bandwidth Memory (HBM) product, the 5th generation HBM (HBM3E), are expected to expand significantly, but DRAM prices are declining, and volatility has increased. Therefore, the securities industry expects performance to enter a downward trend starting from the first quarter of this year.
According to industry sources on the 17th, major domestic securities firms predict that SK hynix recorded sales of 20 trillion won and an operating profit of 8 trillion won in the fourth quarter of last year. It is estimated that over 7 trillion won in operating profit was generated solely from the DRAM business. Analysis suggests that the share of HBM in DRAM sales will expand from about 30% in the third quarter of last year to 40%.
Despite experiencing an unprecedented market downturn in 2023, SK hynix successfully transitioned to profitability faster than Samsung Electronics due to an increase in demand for HBM, high-capacity DDR5 modules, and enterprise SSDs (eSSD) needed for artificial intelligence (AI) data centers. Following an operating profit of 346 billion won in the fourth quarter of 2023, the company expanded its profitability with 2.886 trillion won in the first quarter, 5.4685 trillion won in the second quarter, and 7.03 trillion won in the third quarter; the fourth quarter is expected to see an operating profit of around 8 trillion won, marking a record high.
In contrast to SK hynix, Samsung Electronics is not entering the high-performance HBM supply chain of NVIDIA, which ultimately means that the HBM business has been a decisive factor in the fortunes of the two companies. It is expected that Samsung Electronics' Device Solutions (semiconductors) sector will report an operating profit of less than 3 trillion won in the fourth quarter of last year. Considering that the foundry and system LSI divisions are estimated to have incurred operating losses in the range of about 2 trillion won, the operating profit of the memory division is estimated to be between 4 trillion and 5 trillion won.
However, SK hynix is also likely to experience overall declines due to the bleeding from the DRAM business, which still has a significant share of total sales. According to market research firm TrendForce, unlike the last quarter of the year when prices for the latest server DDR5 products rose by 3% to 8%, prices are expected to fall by about 3% to 8% in the first quarter of this year. Server DDR5 is the product with the highest profit margin in the DRAM business. During the same period, the price drop for server DDR4 is expected to grow from 8% to 13% to 10% to 15%. TrendForce noted that prices for PC, mobile, and consumer DRAM are expected to continue declining in the first quarter of this year, following the trend in the fourth quarter.
A TrendForce official noted, "In the first quarter of this year, server products are expected to see a weakening of prices for both DDR5 and DDR4 due to seasonal demand weakness," adding, "Manufacturers have shifted a significant amount of DDR4 production capacity to DDR5, and some HBM production capacity has also transitioned to DDR5, increasing the supply of DDR5 further."
Meanwhile, Samsung Electronics is in a precarious situation regarding its memory semiconductor business in the first quarter of this year. Amid ongoing delays in the delivery of HBM3E initially targeted for supply to NVIDIA last year, recent statements from Jensen Huang, CEO of NVIDIA, that "redesign is necessary" have raised concerns about low supply prospects. Compounding the difficulties, the company is also facing a downturn in general-purpose DRAM and NAND, with no clear alternatives for recovering from the losses in the foundry business.
An industry official said, "In the case of SK hynix, it is likely to enter a growth phase again starting in the second quarter due to its solid position in the cutting-edge HBM market," while noting, "In contrast, Samsung Electronics may see a deterioration in performance in the first quarter compared to the fourth quarter of last year," adding, "If they cannot find a breakthrough in the HBM market, they could become the biggest victims of the influx of supply from China in the general memory market."