Samsung Electronics’ Semiconductor Division Regains Momentum
Samsung Electronics has made a strong comeback in the semiconductor industry. The company announced that its preliminary sales for the third quarter of this year (July–September) increased by 8.72% year-on-year to 86 trillion Korean won, with operating profit rising 31.81% to 12.1 trillion Korean won. This performance exceeded market expectations, surpassing the projected operating profit of 10.1 trillion Korean won. It marks the first time in five quarters that quarterly operating profit has surpassed 10 trillion Korean won, reaching the highest level in three years since the second quarter of 2022, which recorded 14.1 trillion Korean won. Compared to the second quarter of this year, when an evaluation loss provision of 1 trillion Korean won was reflected due to unsold memory inventory from export restrictions to major countries, operating profit increased by 158.55%. Although departmental performance was not disclosed, the securities industry estimates that the semiconductor business (DS Division) alone generated operating profit in the 5 trillion Korean won range—more than 10 times the semiconductor operating profit of 400 billion Korean won recorded in the second quarter of this year. Sales also surpassed 80 trillion Korean won for the first time on a quarterly basis, setting a new record high.
The semiconductor business (DS Division), which had been sluggish in the first half of this year, is analyzed to have significantly improved and driven overall performance. The surge in demand for general-purpose memory semiconductors has widened profit margins, and shipments of HBM (High Bandwidth Memory) are gradually increasing. Notably, the foundry (semiconductor contract manufacturing) business has stretched its wings as utilization rates rose due to securing new customers. While the home appliance business struggled, the smartphone business sailed smoothly as the Galaxy Z Fold 7, released in July of this year, continued its successful run.
Recovery Amid Industry Challenges
Samsung Electronics lost its position as the world’s top memory semiconductor company to SK Hynix after failing to supply HBM3E, the fifth-generation HBM (High Bandwidth Memory), to NVIDIA in the first half of this year. NVIDIA manufactures and sells AI accelerators centered around GPUs (Graphics Processing Units) to big tech companies, which require large amounts of HBM. Samsung Electronics’ foundry (semiconductor contract manufacturing) also struggled with low utilization rates due to a failure to secure customers, continuing its streak of losses. However, with the onset of a ‘semiconductor supercycle’ marked by a sharp increase in demand in the third quarter of this year, the company appears to have regained competitiveness and rebounded in performance through determined efforts. The securities industry described it as a “return to normalcy from abnormality.”
Riding the Supercycle
The biggest driving force behind Samsung Electronics’ performance recovery lies in the explosive demand currently sweeping the global semiconductor market. As the AI boom has increased demand for AI accelerators, more HBM, which is mounted in these accelerators, has become necessary. HBM is created by stacking and bundling DRAM like apartments. Memory semiconductor companies, including Samsung Electronics, have converted DRAM production lines for HBM use, resulting in a decrease in DRAM production. Additionally, as AI expands into the inference domain, separate storage spaces for aggregating and storing data have become necessary, leading to increased sales of eSSDs (enterprise SSDs). Furthermore, general-purpose DRAM demand for servers has increased as large-scale servers built between 2017 and 2018 reach their replacement cycle. With supply shortages, memory semiconductor prices have soared.
According to market research firm DRAMeXchange, the average fixed transaction price for PC DRAM general-purpose products (DDR4 8Gb) in September was $6.3, up 10.53% from the previous month. This is the first time since January 2019, over six years and eight months ago, that the average fixed transaction price for DDR4 has exceeded $6. This directly benefits Samsung Electronics, which has the largest production capacity among memory semiconductor companies.
Son In-jun, an analyst at Heungkuk Securities, said, “Based on estimates for 2026, Samsung Electronics is projected to account for 32% of DRAM and 30% of NAND flash production (based on wafer input volume) within the entire industry, making it the biggest beneficiary of the memory supercycle.” Many observers predict that this supercycle will continue until 2027. Morgan Stanley recently highlighted in a report titled Memory Super Cycle that “opportunities surrounding HBM are outpacing industry growth rates, and due to demand for AI servers and mobile DRAM, price volatility for general memory chips is accelerating again,” identifying 2027 as the peak of the cycle. This is where continued benefits for Samsung Electronics are anticipated.
HBM Business Gains Momentum
Samsung Electronics’ HBM business is also gaining momentum. It has been reported that Samsung Electronics recently passed NVIDIA’s HBM3E quality tests in effect and has entered discussions on supply volumes. This means that in the competition for next-generation HBM4 supply, Samsung Electronics can finally compete on equal footing with leading rival SK Hynix. Samsung Electronics also decided to expand the supply of high-performance DRAM by participating in OpenAI’s Stargate project, and it is expected to directly benefit as major customer AMD signs a large-scale GPU supply contract with OpenAI. Samsung Electronics is building a strategic partnership with AMD by supplying all HBM3E 12-layer products for AMD’s AI accelerator MI350. Although AMD has not yet decided on the HBM supplier for the MI450 it will supply to OpenAI, the tech industry believes it is highly likely that Samsung Electronics will again supply the HBM. This could lead to a sharp increase in HBM sales for Samsung Electronics, which had been stagnant. The tech industry estimates that the HBM suppliers involved in the transaction between AMD and OpenAI will secure deals worth 15 trillion Korean won.
Ryu Young-ho, an analyst at NH Investment & Securities, said, “Samsung Electronics’ sluggish HBM shipments are expected to recover through securing diverse customers including AMD, and the company is anticipated to record the highest growth rate among the top three DRAM companies by 2026.”
Foundry Business Shows Signs of Recovery
The foundry business, which had been suffering from low utilization rates and continued losses due to yield declines and failure to secure new customers, is also stretching its wings. Recently, it has been reported that Samsung Electronics’ foundry has continued to secure customers centered around 8–4 nanometer (1 nanometer is one-billionth of a meter) processes. Notably, as the likelihood increases that the Exynos 2600, a smartphone AP (Application Processor) developed in-house by Samsung Electronics, will be mounted in the Galaxy S26 series, the utilization rate of Samsung Electronics’ foundry producing it has also risen. The Exynos 2600 is a product applying Samsung Electronics’ 2-nanometer foundry technology. In addition, Samsung Electronics signed a foundry supply contract with Tesla worth approximately 22–23 trillion Korean won in July, and the atmosphere is reversing as Qualcomm, which had halted transactions since 2022, is observed to potentially place orders with Samsung Foundry again. The tech industry views that the operating loss in the non-memory sector, including Samsung Electronics’ foundry, has significantly decreased from around 2.9 trillion Korean won in the second quarter to 700 billion Korean won in the third quarter.
Smartphone and Display Businesses Contribute to Growth
Meanwhile, Samsung Electronics’ smartphone business also contributed to the strong third-quarter performance. It is known that foldable new products released in July maintained operating profit in the 3 trillion Korean won range while achieving success in the U.S. and other markets. Samsung Display is also believed to have recorded profit in the 1 trillion Korean won range by beginning full-scale supply of OLED panels to Apple’s iPhone 17, a major customer. On the other hand, the home appliance and TV business is reported to have underperformed due to U.S. tariffs and logistics cost burdens. Samsung Electronics’ performance is highly likely to continue improving. Korea Investment & Securities raised its 2026 operating profit estimate for Samsung Electronics to 73 trillion Korean won, a 36% increase from the previous estimate of 54 trillion Korean won.
