DRAM price surpasses gold price

Samsung Electronics is the first Korean company to achieve quarterly sales exceeding 100 trillion won and operating profit over 50 trillion won. Its first-quarter operating profit reached a staggering 57.2 trillion won, equivalent to a profit of 440 million won per minute or 6.356 trillion won per day over three months. If this amount were evenly distributed among South Korea's 51.11 million citizens, each person would receive 1.12 million won.

Samsung's impressive performance is driven by the “dual engine” of soaring DRAM, NAND, and HBM prices and volumes. This fully showcases how Korean semiconductor firms are achieving global expansion amid AI-driven demand. Samsung's first-quarter profit already surpassed its profit for the entire previous year—a record only matched by a few companies such as Nvidia, Amazon, Tesla, and SK Hynix. Industry insiders anticipate that, driven by strong demand for memory semiconductors, Samsung will continue to see huge profits in the second quarter and the second half of the year.

Samsung's explosive profit growth in the first quarter was largely due to the surge in DRAM prices. The rapid development of artificial intelligence has triggered an explosive demand for HBM (memory chips used in Nvidia GPUs and AI data centers). HBM uses a DRAM structure akin to apartment-style stacking, forcing manufacturers to adjust production lines and causing shortages in DRAM supply. Server DRAM, also a critical component in AI infrastructure, is facing shortages as well, further pushing up prices. According to DRAMeXchange data, DRAM contract prices have risen for 11 consecutive months, climbing from $1.35 in January last year to $13 at the end of March this year. As of the 7th, the latest server DRAM “DDR5 16Gb 4800/5600” chip price has soared to $37 per chip, making its price per gram (327,749 won) higher than gold (224,630 won). Back in June last year, this chip was priced at just $6.01.

The surge in DRAM prices has greatly benefited Samsung, which, alongside SK Hynix and Micron, is one of the largest DRAM manufacturers. Meritz Securities analyst Kim Sun-woo estimated that DRAM and NAND flash prices have risen by over 90% quarter on quarter, attributing Samsung's success to its aggressive pricing strategy and cost leadership as an industry leader.

Although Samsung did not disclose profit by its various business units, analysts estimate that out of the total 57.2 trillion won profit, the memory business contributed 54 trillion won. Reports state that the system-level chip (semiconductor design) and foundry (contract manufacturing) business posted a loss of 1.6 trillion won, while the smartphone and network business posted a profit of 4 trillion won, and the home appliances and television business reported 100 billion won in profit.

Despite the ongoing Iran war, the semiconductor industry expects that as AI investment continues, demand for memory will remain robust in Q2 and the second half. Citigroup predicts that the five largest US tech firms—Alphabet, Amazon, Meta, Microsoft, and Nvidia—will increase their AI infrastructure spending by 69% this year to reach $700 billion. TrendForce forecasts DRAM prices will rise 58%-63% in the second quarter. Even as companies expand production, shortages are expected to persist until 2027.

Analysts project Samsung's operating profit could exceed 300 trillion won this year and 400 trillion won next year. KB Securities head of research Kim Dong-won stated, “The trend of increasing memory use in AI inference will continue for years.” He forecasts Samsung's operating profit will reach 327 trillion won by 2026 and 488 trillion won by 2027, surpassing Nvidia. The gap between Samsung and global leader Nvidia is expected to narrow to 30 trillion won this year and overtake Nvidia next year.

Risks remain: Continued Iran conflict could dampen AI investment and thus suppress the semiconductor boom. The rise in memory chip prices could also drive up smartphone costs, with global smartphone sales forecast to decrease 17% year-on-year.

Samsung’s Chips: Cashing In

Driven by the growing demand for Samsung memory chips to power artificial intelligence workloads, Samsung Electronics Co. has forecast a record quarterly profit. On this news, the company’s stock jumped as much as 5% in today’s trading session before settling up 2%.

The world’s largest memory chip supplier predicts first-quarter operating profit of 57.2 trillion won ($37.9 billion), well above analysts’ previous estimate of 40.6 trillion won. This figure is more than eight times the 6.69 trillion won from the same period a year ago, and triple the record 20 trillion won operating profit set three months earlier.

With demand for its memory chips far outstripping supply, Samsung has become one of the biggest beneficiaries of the AI boom. Its memory chips are not only used in data center AI servers but also in PCs, smartphones, and many other computing devices.

TrendForce projects that due to ongoing supply shortages, prices for dynamic random-access memory (DRAM) chips will rise by over 50% this quarter. Meanwhile, Meritz Securities analyst Kim Sunwoo told Reuters that actual contract prices are sometimes even higher than market expectations. In addition, the depreciation of the won has boosted Samsung’s overseas profits. The won recently fell to its lowest exchange rate against the US dollar in 17 years.

Although Samsung did not release detailed profit breakdowns in its earnings forecast, Kim Jung-eun said the firm’s chip division may have generated about 54 trillion won in profit, accounting for roughly 95% of total profit. In contrast, its smartphone business is expected to generate only 4 trillion won in profit, slightly lower than the same period last year, but ahead of analysts’ expectations.

The company has made substantial progress in high-bandwidth memory chips, an area where it previously struggled to bring its most advanced chips to market. Last year, the HBM chip market was dominated by rival SK Hynix, but Samsung has since delivered its latest HBM4 chips to customers, regaining market share.

However, most of Samsung’s profit windfall has come from soaring prices of traditional memory chips, which are essential for AI inference. HBM chips are mainly used for AI training workloads. According to analysts, HBM chips account for only about 5% of the company’s total chip revenue.

Kim Jung-eun stated that the growth in Samsung’s smartphone business was due to low-cost components in inventory. However, as inventories are depleted, the company’s profit margin may fall in the second quarter, as it will have to buy new components at higher prices then.

Samsung also provided a total revenue forecast, expecting revenue to grow to 133 trillion won, up 68% year-on-year. The company will release its full financial results on April 30.

Nevertheless, Samsung’s outlook for the coming quarters remains challenged by several headwinds. The US-Iran war has driven up energy costs, raising concerns that AI data center demand for memory chips could weaken. In addition, Middle East conflict could disrupt chip manufacturing supply chains, slowing growth momentum.

NH Investment & Securities analyst Ryu Yong-ho told Reuters that Samsung will attempt to restructure its long-term contracts to maintain growth in its semiconductor business. Still, “there are ongoing concerns that memory chip prices could reach their peak.” Analysts say such concerns are already evident, as DRAM spot prices fell last week since end users are struggling with the high prices.

Last month, Google launched a new technology called TurboQuant to enable AI workloads to run on chips with less memory, briefly hitting Samsung’s stock. However, Samsung’s stock soon rebounded and is up 61% so far this year.

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