LS Securities Raises Samsung Target, Cuts SK hynix
“HBM Supplier Competition Returning to Normal”
As Samsung Electronics quickly secures production stability in the sixth-generation High Bandwidth Memory (HBM4) market—faster than initially expected—market evaluations of Korea’s two major semiconductor players, Samsung Electronics and SK hynix, are showing sharply diverging trends. The era of SK hynix’s dominance, which was fueled by unrivaled market share and exclusive market premiums, appears to be ending. With competition in the supply chain returning to normal, a full-scale valuation rerating for both companies is now underway.
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Samsung Electronics HBM4 Yield Surges… Target Price Jumps 12.5% to 4.5 Million Won
On August 31, LS Securities raised its target price for Samsung Electronics by 12.5%, from 4 million won to 4.5 million won, and maintained its “Buy” rating. The adjustment was based on Samsung’s improvements in HBM4 yield and production scalability, reflecting the rapid recovery of HBM competitiveness. Previously, delayed customer qualifications and lower mass production capabilities versus competitors had been chronic factors depressing the share price.
According to LS Securities’ analysis, HBM4’s share of Samsung’s total HBM shipments surged from about 5% in the first quarter of this year to approximately 35% in the second quarter. Unlike the early trials and errors experienced when ramping up the fifth-generation HBM3E, production stability with HBM4 has risen significantly. Notably, despite the rapid increase in the share of new products, Samsung’s mixed HBM yield improved by more than 5 percentage points quarter-on-quarter in the second quarter, indicating that it has now entered the yield stabilization stage.
Seoul Samsung Electronics Seocho Building. Photo by Yonhap News
Jung Woosung, a research analyst at LS Securities, stated, “If mixed yield continues to improve as the share of HBM4 expands, the speed at which the growth in HBM sales translates into profitability for the entire company could far exceed current market expectations.” He simultaneously raised projections for shipment volumes and profitability.
However, he also dismissed scenarios of unlimited price hikes across the memory sector. Jung explained, “While memory supply shortages are likely to persist in the medium to long term, further price increases are more limited than in the past, given that memory already makes up a large share of big tech server budgets due to previous price hikes.” Thus, he forecast that following the recovery in HBM4 competitiveness, Samsung’s share price would move within a price-to-book ratio (PBR) range of 1.0–1.3 times, based on the estimated controlling shareholder’s equity for 2028, rather than unlimited multiple expansion.
SK hynix Target Price Plummets 27%… “Monopoly Premium Shrinking, OPM Normalizes to 60%”
In contrast, expectations for SK hynix, which effectively monopolized the HBM market in recent years, have been drastically lowered. LS Securities maintained its “Buy” recommendation for SK hynix, but slashed its target price from 3.3 million won to 2.4 million won—a decrease of 900,000 won, or about 27.3%.
The main reason behind this target price cut is the readjustment of next year’s HBM profitability outlook. LS Securities had initially projected SK hynix’s HBM operating profit margin (OPM) would approach 80% next year, but reflecting the latest industrial developments, revised the estimate to around 60%, similar to this year’s level.
In front of SK hynix headquarters in Icheon, Gyeonggi Province. Photo by Yonhap News
This figure reflects a comprehensive consideration of investment sustainability for major customers such as Nvidia and big tech companies. If HBM OPM were to soar to 80%, Nvidia would need to further raise AI chip prices to maintain its own gross profit margin (GPM) of about 75%. This would put additional pressure on big tech’s server budgets—already strained by high memory prices—and could stifle the expansion of the broader commodity DRAM market. LS Securities views a 60% HBM OPM as a sort of “Goldilocks” equilibrium that satisfies the investment sustainability for customers, memory makers, and the broader AI ecosystem.
Furthermore, as Samsung’s mass supply of HBM4 becomes a reality, customers such as Nvidia are increasingly diversifying their supply chains (multi-sourcing). As a result, the extraordinary profits and premium that SK hynix had enjoyed due to its monopoly position are inevitably diminishing.
This Is Not the End of the Memory Cycle… “Technological Superiority and Market Share Matter More Than Market Size”
Experts agree that this round of share price adjustments does not signal a slowdown in HBM demand or a transition to a memory downcycle. While the overall HBM market continues to expand, the ongoing valuation recalibration stems from the transition of the previously oligopolistic market—once concentrated among a few firms—into a normal, multi-player competitive structure.
Semiconductor circuit board. Photo by AFP Yonhap News
LS Securities explained that this target price adjustment is not indicative of waning HBM demand or a memory market peak. Rather, it reflects a reset of expectations for next year’s excess HBM profitability following the entry of Samsung Electronics and the subsequent rebalancing of the supplier concentration premium. The firm also suggested that if further productivity improvements reduce costs or new AI demand drivers appear, profit margins could rise again.
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Ultimately, for SK hynix and other memory manufacturers, the key driver of future share prices is expected to shift away from the overall growth scale of the HBM market, instead focusing on whether firms can secure clear technological superiority with next-generation standards and maintain high market share among key customers compared to their competitors.
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