Samsung Electronics and SK Hynix are expected to deliver record-breaking results in the fourth quarter of last year, led by memory semiconductors. Both companies achieved operating profit that far exceeded market estimates, and brokerages are sharply raising their earnings forecasts for this year.

Samsung Electronics posted preliminary fourth-quarter operating profit of 20 trillion won. That was up 208.2 percent from a year earlier and up 64.3 percent from the previous quarter. Hana Securities analysed that the memory segment is expected to post operating profit of 17.7 trillion won. DRAM prices rose 40 percent and NAND prices gained 22 percent. As Samsung Electronics holds leadership in each supply market, it secured profits from the price increases as they were. The gains also far exceeded earlier forecasts of 31 percent for DRAM and 18 percent for NAND, surpassing the previous consensus.

SK Hynix is also estimated to have posted fourth-quarter operating profit of 17 trillion won. Kiwoom Securities forecast SK Hynix's fourth-quarter operating profit at 16.2 trillion won, and Hana Securities estimates 17 trillion won. Although the benefit from rising DRAM prices eased somewhat as HBM's share of sales exceeded 30 percent, overall results improved as general DRAM prices rose more strongly than expected.

Behind the sharp rise in memory prices are a surge in demand for AI servers and supply shortages. IBK Investment & Securities analysed that DRAM's BOM cost share stood at 9.9 percent as of December, well above the historical average of 5.4 percent. BOM, or bill of materials, cost share refers to the portion of manufacturing costs for PCs or smartphones accounted for by memory semiconductors. If this share rises excessively, makers of finished products may raise prices or reduce memory capacity, which could lead to weaker demand.

Reflecting this, major PC makers have already raised product prices by 10 to 30 percent, and Chinese smartphone makers have also increased prices by more than 15 percent. Dell and Lenovo announced they would raise prices for enterprise general-purpose servers by more than 10 percent, and the cost of building AI servers is also expected to rise by up to 25 percent. According to iM Securities, as customers ease the burden of memory costs through price hikes, room for further memory price increases has also grown.

◆"AI scale-out effect will continue in 2026"

Brokerages are sharply raising their earnings forecasts for both companies this year. Hana Securities forecast SK Hynix's 2026 operating profit at 112 trillion won. That would be up 147 percent from a year earlier. Memory prices are also rising. It expected DRAM prices to rise 54 percent in 2026 and NAND to rise 55 percent. Kiwoom Securities raised its 2026 operating profit forecast for SK Hynix to 103 trillion won. It sharply raised operating profit for the NAND segment to 13 trillion won from the previous 3.5 trillion won.

SK Securities analysed that the memory industry has entered a phase of quantitative growth as demand expansion from AI scale-out combines with limited supply capacity. It said strong demand is emerging across memory, including not only HBM but also server DRAM, LPDDR and SSD. Discussions on long-term supply contracts with customers are proceeding over the next 2 to 3 years, supporting a longer cycle and improving earnings visibility.

Still, the possibility of slowing demand is a risk. Market demand could instead fall as rising prices lift the burden of BOM costs. IBK Investment & Securities pointed out that demand could weaken if customers' memory procurement is satisfied and the effects of higher set prices and reduced memory capacity emerge.

But in the short term the market is reacting explosively. On Jan. 16, Samsung Electronics hit a record high. The stock rose 3.47 percent from the previous day to 148,900 won as of 3:30 p.m. It climbed as high as 149,400 won during the session, at times eyeing the 150,000 won level. SK Hynix also rose 0.93 percent from the previous day to 765,600 won.

The surface reason is the impact of TSMC announcing its biggest-ever results. TSMC said its revenue this year would rise by about 30 percent from a year earlier, helped by growing demand for AI chips. Behind that, expectations also played a part that Samsung Electronics would benefit as TSMC cannot shoulder the entire rise in global demand for AI semiconductors.

In brokerage circles, there is also a forecast that Samsung Electronics shares could rise to 200,000 won. The analysis is that momentum from higher memory prices will persist for the time being and upward revisions to earnings consensus will drive the stock higher. Coincidentally, both companies will announce final fourth-quarter results on the same day. Samsung Electronics is scheduled to release its 2025 fourth-quarter business results at 10 a.m. on Jan. 29, and SK Hynix at 9 a.m. on Jan. 29.