The gap in operating profit forecasts between Samsung Electronics and SK hynix, ahead of the announcement of their second quarter results this year, is widening. Initially, operating profit for SK hynix was expected to be in the range of 7 to 8 trillion won, but recently several securities firms have forecasted it to be in the 9 trillion won range. In contrast, Samsung Electronics’ initial forecast of around 7 trillion won has recently fallen to 5 trillion won, leading to analyses predicting an 'earnings shock.'
According to the industry on the 3rd, Samsung Electronics is scheduled to announce its preliminary results for the second quarter early next week. Securities firms are lowering their performance forecasts for Samsung Electronics from the existing consensus (the average forecast of securities firms). Initially, the financial information provider FnGuide estimated Samsung Electronics’ second quarter performance to be sales of 76.64 trillion won and operating profit of 6.82 trillion won. Until May, it was mainstream to predict that operating profit would reach 7 trillion won.
However, since May, the situation inside and outside Samsung Electronics has worsened, lowering performance expectations. Korea Investment & Securities recently estimated Samsung Electronics’ second quarter operating profit to be in the mid to high 5 trillion won range. Additionally, several securities firms have presented operating profit forecasts in the low to mid 5 trillion won range.
The main reason for the downward adjustment of Samsung Electronics’ operating profit forecast by 1 to 2 trillion won is the poor performance of the high bandwidth memory (HBM) business, which is the company's largest revenue source this year. Since last year, Samsung Electronics has aimed to supply the 5th generation HBM (HBM3E) to Nvidia, the largest buyer in the industry, but the delivery has been delayed indefinitely.
The losses in the foundry division and the system LSI division are also holding it back. DS Investment Securities estimated that the foundry division’s losses in the second quarter would reach 2.1 trillion won, which is 200 billion won more than previously expected, and it is estimated that the NAND flash business has shifted from a previous profit forecast to a projected loss of 300 billion won. Analyses suggest that profitability in the TV, home appliances, and display businesses has also slowed.
In contrast, SK hynix is speculated to surpass 9 trillion won in operating profit in the second quarter. Earlier, Daishin Securities projected 9.1 trillion won, while Hanwha Investment & Securities, Hyundai Motor Securities, and KB Securities also suggested figures around 9 trillion won, raising performance expectations. If actual results align with these expectations, it will mark a new record in just two quarters since the fourth quarter of last year (8.08 trillion won).
Cha Min-sook, a researcher at Korea Investment & Securities, stated, "It appears that HBM accounts for more than half of total DRAM sales," adding, "The fact that we effectively monopolized supply of the HBM3E 12-layer product in the first half and maintained a high price premium has greatly contributed to revenue expansion."
The monopoly structure of SK hynix in HBM is expected to continue throughout this year. Lee Min-hee, a researcher at BNK Investment Securities, noted, "Although Micron has recently received certification from Nvidia, its yield rate is not satisfactory, whereas SK hynix is understood to have secured a stable yield rate in the mid to high 60% range," and analyzed that starting from the end of the year, the company will monopolize the supply of HBM4 (6th generation HBM) and is expected to occupy more than 70% of the Nvidia HBM4 supply chain next year.
Forecasts have also emerged that SK hynix will enter an era of 10 trillion won in operating profit starting in the third quarter. Jeong Min-kyu, a researcher at Sangsangin Investment & Securities, explained, "The expansion of the HBM3E 12-layer product mix and the completion of inventory adjustments for enterprise solid-state drives (eSSD) in the second half will positively impact performance," while expecting third quarter operating profit to increase by 41.7% year-on-year to reach 10 trillion won.