Samsung Electronics and SK hynix face uncertainty after Micron forecast disappoints

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Samsung Electronics and SK hynix face uncertainty after Micron forecast disappoints

Published: 19 Dec. 2024, 18:12

JIN EUN-SOO
[email protected]

Audio report: written by reporters, read by AI

A view of a building where the facilities of US semiconductor giant Micron are located in Shanghai, China, on May 22, 2023 [AFP/YONHAP]

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Weak guidance from U.S. memory chipmaker Micron for the December-February period has shaken investor confidence in Samsung Electronics and SK hynix, raising concerns about potential downturn in the memory chip market early next year.

Shares of Samsung Electronics dropped 3.1 percent on Thursday while SK hynix saw a steeper decline of 4.6 percent, closing at 53,200 won ($36.65) and 175,000 won, respectively.

Micron, one of the top three players in the dynamic random access memory (DRAM) chip market, is often viewed as a barometer for the performance of Samsung and SK hynix, both of which operate in the same market and share similar clients.

Since Micron's fiscal year starts earlier than those of the other two companies, its earnings serve as a useful indicator of what to expect in the coming quarter for the Korean chipmakers.

For its fiscal Q1 2025, Micron reported $8.7 billion in revenue, an impressive 84% year-over-year increase that exceeded market expectations. Sales of chips for AI data centers, including highly coveted high bandwidth memory (HBM), soared by 400 percent compared to the same period of last year.

However, it was Micron's outlook for the coming quarter, starting in December, that spooked investors.

The company forecast quarterly revenue of $7.9 billion, falling short of Wall Street's consensus estimate of $8.9 billion. As a result, Micron's shares tumbled by 16 percent in after-hours trading.

Micron attributed the weaker-than-expected outlook to slower turnover in the PC market and sluggish demand for smartphones and automotive chips.

“While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year,” Micron CEO Sanjay Mehrotra said in a press release.

“We continue to gain share in the highest-margin and strategically important parts of the market, and we are exceptionally well-positioned to leverage AI-driven growth to create substantial value for all stakeholders.”

Despite revenue from AI data center chips surpassing half of total revenue for the first time in the previous quarter, it apparently wasn't enough to offset declining demand for legacy chips.

Price pressure from Chinese chipmakers, represented by ChangXin Memory Technologies (CXMT), is also dragging down the market forecast for the next year.

Mehrotra acknowledged an “increase in bit supply at legacy technology nodes from a China-based DRAM and a China-based NAND supplier” but brushed off concerns by saying that Micron's sales are concentrated in high-end products.

CXMT, however, was recently suspected to have made a DDR5 product which is an advanced type of DRAM chip going into AI data center and gaming PCs.

Brokerages in Korea have consequently lowered their profit outlooks for Samsung Electronics and SK hynix.

Hanwha Investment & Securities recently lowered its operating profit forecast for Samsung Electronics' chip business in the fourth quarter from 5.8 trillion won to 3.6 trillion won. For the full year of 2025, it lowered it to 35.1 trillion won from 46 trillion won.

“Shipment of DRAM and NAND fall short of what we have initially estimated,” said Hanwha Investment & Securities researcher Kim Kwang-jin.

“Sluggish demand from its old clients will only intensify, and price pressure for DRAM will grow from 3Q25 and for NAND from 1Q25.”

BY JIN EUN-SOO [[email protected]]