Samsung Electronics and SK Hynix are expected to post record-high profits from their memory businesses in the third quarter this year, supported by rising prices for DRAM and NAND flash. Samsung is expected to post companywide operating profit of more than 100 trillion won, with profit at its Device Solutions (DS) division, which oversees semiconductors, projected to exceed total company profit. SK Hynix is estimated to post operating profit in the 70 trillion won range.

Industry sources said on Tuesday that the combined operating profit of Samsung's DS division and SK Hynix's chip business in the third quarter is expected to reach 177 trillion won. The driver is rising memory prices. Samsung's average selling prices (ASPs) for DRAM and NAND in the third quarter rose 17 percent and 18 percent, respectively, from the previous quarter. Profit rose as supply shortages persisted, while server DRAM and enterprise SSD (eSSD) prices increased and shipments of standard DRAM remained constrained. It is also assessed that price negotiations for commodity DRAM and NAND in the fourth quarter and the first quarter next year are developing in a way that favors suppliers.

Samsung's DS division profit is expected to exceed companywide profit. According to Eugene Investment & Securities, Samsung's companywide operating profit in the third quarter is expected at 103.6 trillion won, and DS division operating profit at 104 trillion won. The reversal is attributed to losses at the DX division, which oversees smartphones and home appliances. Sales rose on strong demand for new products such as the Galaxy Z Fold8, but the DX division's loss widened because higher costs were not passed on to prices, it said. Even within the DS division, profit is concentrated in memory, and the foundry business is also expected to remain loss-making this quarter.

At SK Hynix, higher memory prices were reflected directly in companywide profit. According to Mirae Asset Securities, SK Hynix's third-quarter operating profit is estimated at 73 trillion won. That is up from 60.5 trillion won in the second quarter. Mirae Asset Securities raised its DRAM ASP outlook even as it lowered its estimate for full-year operating profit. It forecast DRAM ASPs will continue rising quarter on quarter in the fourth quarter following the third quarter, with operating profit increasing further in the fourth quarter.

There is also a view that these forecasts look low because brokerages have reflected a stronger won. Memory is an export item traded in dollars, so when the won strengthens, profit converted into won decreases. Eugene Investment & Securities lowered its won-dollar exchange rate assumption applied to Samsung's results to 1,400 won. Hana Securities and IBK Investment & Securities also lowered their Samsung estimates on exchange-rate reasons, and Mirae Asset Securities reflected a currency decline in its SK Hynix estimates.

These results are also drawing attention because they mark the starting point at which profits begin reflecting a next-generation product called HBM4, allowing profit trends after the fourth quarter to be projected. Daishin Securities said SK Hynix's HBM4 shipments are expected to ramp up in earnest from the third quarter. Some have raised concerns about HBM4 quality issues for major customers, but it judged the risk is unlikely to be unresolvable. SK Hynix is currently mass-producing a 12-high HBM4 product, and its 16-high product is in the certification stage. Samsung also expects HBM4 to become a main product from the second half of this year.

Both companies are expected to see a bigger profit contribution from HBM next year. This year, the rise in commodity DRAM prices was so large that HBM's share of Samsung's DRAM revenue fell to less than 5 percent. Hana Securities analysed that next year, as HBM4 shipments ramp up, that share will expand to around 15 percent.