SK hynix Target Price Slashed by 30%... Why Are Securities Firms Raising Samsung and Lowering SK hynix?

LS Securities Raises Samsung Target, Cuts SK hynix

"HBM Supplier Competition Returning to Normal"

As Samsung Electronics secures mass production stability in the 6th generation High Bandwidth Memory (HBM4) market sooner than initially anticipated, analysts' assessments of Korea's two semiconductor giants, Samsung Electronics and SK hynix, are sharply diverging. With the era of SK hynix's dominance—thanks to its overwhelming market share and exclusive market premium—coming to an end and supply chain competition entering full swing, both companies appear set to enter a phase of full-scale valuation re-rating.

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Samsung Electronics HBM4 Yield Soars... Target Price Jumps 12.5% to 450,000 won

On August 31, LS Securities raised its target price for Samsung Electronics by 12.5% from the previous 400,000 won to 450,000 won, maintaining its 'buy' recommendation, citing improvements in HBM4 yield and mass production stability. The assessment stems from the judgment that Samsung Electronics’ HBM competitiveness—previously considered a chronic drag on its share price due to delayed client certification and lower mass production efficiency compared to competitors—is recovering rapidly.

According to LS Securities, HBM4's share within Samsung Electronics' total HBM shipments surged steeply from about 5% in the first quarter of this year to around 35% in the second quarter. Unlike the early mass production struggles seen with the previous 5th-generation HBM3E, Samsung Electronics achieved a breakthrough in production stability with HBM4. Notably, even as the proportion of the new product rapidly increased, the mixed yield rate for HBM in the second quarter improved by over 5 percentage points compared to the previous quarter, marking the stabilization phase for yields.

Seoul Samsung Electronics Seocho Building. Photo by Yonhap News

Jung Woosung, a research analyst at LS Securities, stated, “If the mixed yield rate continues to improve as the HBM4 proportion increases, the pace at which HBM revenue enhances Samsung Electronics’ overall profitability could far exceed current market expectations.” Accordingly, the firm raised its forecasts for both shipment volume and profitability.

However, regarding the overall memory industry outlook, Jung drew the line at a scenario of unlimited price increases. He explained, "While memory supply shortages are expected to persist in the long term, the share of memory within big tech server budgets is already high due to previous price increases, so there is less room for additional price hikes than in the past." Therefore, after the recovery in HBM4 competitiveness, Jung expects the stock price to fluctuate within a price-to-book ratio (PBR) of 1.0 to 1.3 times based on projected 2028 controlling shareholder equity, rather than seeing unlimited multiple expansion.

SK hynix Target Price Plunges by 27%... "Monopoly Premium Diminished, OPM Normalizes to 60%"

In contrast, expectations surrounding SK hynix—which had effectively monopolized the HBM market—have been significantly lowered. While LS Securities kept its 'buy' rating on SK hynix, it slashed its target price by a substantial 900,000 won (about 27.3%) from 3,300,000 won to 2,400,000 won.

The core reason behind the target price downgrade is the realistic outlook for HBM profitability next year. LS Securities had initially forecast SK hynix's HBM operating profit margin (OPM) to approach 80% next year, but reflecting recent industry developments, adjusted its forecast to around 60%, a level similar to this year.

In front of SK hynix headquarters in Icheon, Gyeonggi Province. Photo by Yonhap News

This figure considers the long-term investment sustainability of key customers like NVIDIA and major big tech companies. If HBM operating margins were to soar to 80%, NVIDIA would have to further increase AI chip prices to maintain its own gross profit margin (GPM, about 75%), potentially putting additional strain on big tech server budgets already pressured by high memory costs and hindering the expansion of the general DRAM market. LS Securities views the 60% HBM OPM as a ‘Goldilocks’ level that satisfies the investment continuity of clients, memory manufacturers, and the broader AI ecosystem.

Additionally, with Samsung Electronics' large-scale HBM4 supply becoming a reality, major customers like NVIDIA are expected to accelerate their efforts at supply diversification (multi-sourcing). As a result, it is seen as inevitable that the excess profitability and premium previously given to SK hynix due to its monopolistic supply position will be mitigated.

The Memory Cycle Is Not Over... 'Technological Edge and Market Share,' Not 'Total Market Size,' Are the Key Variables

Experts agree that the recent stock price adjustments do not signal a slowing in HBM demand or a shift toward a memory downcycle. The HBM market's overall growth potential remains intact; the current valuation recalibration is taking place as the previously oligopolistic market, centered on a few firms, transitions to a healthy multi-player competitive landscape.

Semiconductor circuit board. Photo by AFP Yonhap News

LS Securities explained that the target price adjustment does not reflect weakening HBM demand or a memory industry peak, but rather it rationalizes previously projected excess profitability for next year and recalibrates the supplier concentration premium in light of Samsung Electronics' entry. The firm also noted that should further yield improvements lead to cost reductions or if new AI demand streams expand, profit margins could again rise.

Ultimately, the central variables determining the share prices of memory manufacturers like SK hynix going forward are likely to shift from overall HBM market growth toward whether they possess a clear technological edge over competitors with each next-generation standard and can maintain high market shares with major clients.

This content was produced with the assistance of AI translation services.