10.30.25
Samsung is the market leader in both DRAM and NAND. Their memory division is just one part of a massive conglomerate. I look through their earnings presentation and conference call transcripts for insight into the state of the memory market. This is not an analysis of their earnings, prospects, etc.
Earnings Presentation
· Memory sales again rose sequentially, following the 10% increase seen between Q1 and Q2. From Q2 to Q3, memory sales increased 25.9%, to KRW 26.7T. That is US $18.66B. Samsung’s memory division is similar in size to Hynix and only about 1.5x the size of Micron. Two years ago, Samsung was a little smaller than Micron and Hynix combined.
· The company “sequentially expanded HBM3E sales in line with strong AI demand. Demand is healthy across all applications.
· Better pricing has led to higher profitability. Some of their sequential profit increase is from a one-time inventory value adjustment. I wonder if this is marking some of the HBM inventory back up that had previously been marked down because of qualification problems.
· The outlook for Q4 is to deliver HBM3E and high-density eSSD to meet demand from the AI and conventional server markets.
· The strategic focus in 2026 is entirely about demand from AI applications. The first section is “Strategic Focus on HBM,” specifically expanding HBM4 business and growing HBM sales to broaden their position in the HBM market. The second section on 2026 is about increasing sales to meet AI demand with non-HBM products. Their 2026 strategic focus is completely orbiting AI demand.
· Capital expenditures in the quarter for the whole company were US $7.55B. The company does not break out memory from other CapEx, so this number will only be useful relative to other quarters at Samsung.
**Earnings Call **
These are the highlights and quotes regarding DRAM and NAND:
· The third quarter was the strongest quarter ever for sales in their memory business. Demand is strongest in the server segment, focused on HBM, high-density DDR5 and server SSDs.
· Mobile and PC supply-demand dynamics remain tight as bits have been drawn away from those segments to meet server demand.
· AI-related server demand keeps growing and it significantly exceeds supply. The fourth quarter will be a stronger continuation of the performance in the third quarter.
· The company believes, even with their supply expansion plans, that demand will continue to exceed supply in 2026. Customer orders for 2026 are coming in larger and faster than is typical.
· AI related CapEx has been increasing even more than their expectations.
· In Q3, DRAM bit growth was in the mid-teens percent range. For NAND, the company focused on margin over revenue, and bit growth was around 10%. Bit growth in both DRAM and NAND exceeded their guidance.
· DRAM ASPs rose mid-10% quarter-over-quarter. NAND ASPs rose by mid-single-digits percent sequentially.
· Memory inventory across the industry is dropping to “subnormal” levels, thus supply is expected to be “highly limited, and rising prices are expected to increase further for DRAM and NAND across all applications.”
· DRAM shipments in Q4 will be low-single-digits %, because inventories are low.
· NAND shipments in Q4 will increase 10% over Q3. The share of server SSDs in their mix is expected to increase substantially.
· They are seeing HBM demand grow at a faster pace than supply. Their third quarter HBM bit shipments increased 80% quarter-over-quarter. In the prior quarter, HBM bits grew 30% sequentially. Excepting a small tail, their overall HBM sales mix is fully transitioned to HBM3E. Last quarter, their share of HBM bits in HBM3E was in the high 80% level. This is a milestone in that Samsung must have their HBM3E qualified at most big customers. I think they are shipping a lot of bits that were backed up in inventory, pending qual, hence the massive increase in HBM bit shipments this quarter over last.
· The company has shipped HBM4 samples to customers.
· Their 2026 HBM bit production plan already included a “significant increase.” So much customer interest is coming in they are considering further capacity expansions.
· Constrained DRAM supply is expected to continue into next year (2026).
· The shortage of hard drives may cause NAND industry levels, through higher SSD sales, to bottom out faster than previously expected. They believe their available supply will “remain far short of meeting customer demand.”
· From their VP of mobile devices, memory prices saw a significant rebound in Q3 with a steeper rise expected in Q4.
· The company is considering a “significant year-on-year increase” in CapEx in 2026 over 2025. Past year’s investment has been in cleanroom for the future. Now they plan to “execute facility investments at a scale required to address rising demand.” I think this means they will shift the fraction of total CapEx to more WFE from cleanroom, and that they think demand will continue to rise and exceed supply. DRAM share of total investment will likely increase in 2026 compared to 2025.
· The company said last quarter that they believed HBM3E supply had grown faster than demand, and they anticipated supply-demand dynamics to change. There was no mention of that view this quarter, even as their supply surged. My conclusion from that is HBM demand grew significantly in the last ninety days. I said last quarter that I thought the memory market would turn down by the end of 2025. With two months left and broad strength in both memory markets, that prediction is highly likely to be wrong.
Bit Shipments and Pricing
The company’s DRAM bit shipments in Q3 were up 15% sequentially. That follows a 13% sequential increase from Q1 to Q2. I marked the bottom of the last downturn , at least for bit shipments, to have been calendar Q1 of 2023. Since then, Samsung’s bits have grown ~80%, a 27% CAGR. That bottom was ten quarters ago. However, pricing is what matters most. For Samsung, the bottom of the DRAM downturn was in Q2 of 2023. Over the nine full quarters since that nadir, Samsung’s blended DRAM ASP has risen by about 140%. That is a CAGR in the high 40% range, an historic run for DRAM pricing that normally declines in the high single digits, on average, every year. But nothing in DRAM is average. During the six quarters of the prior downturn, Samsung’s blended DRAM price declined by 55%. This run-up is historic and shows no signs of slowing down.
NAND pricing at Samsung – and elsewhere in the industry – has defied past history. The NAND market started to soften late in Q3 of last year and dropped for three quarters. But the trend reversed and ASPs at Samsung for NAND were up 5% from Q2 to Q3 and are predicted to go up further from this quarter to Q4. Bit shipment growth was stunning last quarter, up 29% for the company. This quarter, bit shipments from Samsung were up a modest, but still impressive, 10% sequentially. Samsung’s blended NAND ASPs started to rise in Q3 of 2023. In the intervening nine quarters, their pricing is up around 75%, and peaked at an increase of almost 120% a year ago before declining for three quarters prior to the nascent recovery we are seeing now. Samsung’s NAND bit shipments don’t show the sine wave of a memory cycle. There were two consecutive quarters of ~9% declines in mid-2022. Since then, there has been one quarter with a 10% drop (Q1-25) following four flat-to-down quarters prior. Over that entire time, three full years, Samsung has grown their total NAND bit supply by 80%, a 21% CAGR.
Summary
I wondered last quarter, following Samsung’s statement about HBM3E supply catching up with demand, if conventional DRAM would go into undersupply and HBM would become oversupplied. Ninety days later, demand has strengthened to such a degree that all segments of DRAM are in shortage and experiencing rapid increases in price. Even the NAND market has turned healthy. Exceptionally strong demand from data center customers, colliding with industry-wide inventory reaching normal levels, is behind the bullishness in memory. Samsung is typically conservative in their statements and parsimonious in their information sharing. While the latter remains true, the company said demand is so strong they are considering expanding capacity in 2026. The most important news to me was the increase in their HBM shipments, and the composition of those bits. Almost all of the company’s HBM shipments are HBM3E. Total HBM bit shipments increased 80% sequentially. That is a massive increase, and one that isn’t sustainable. While I believe the company has a lot of HBM capacity in place to reclaim their top spot in DRAM, growing that much in one quarter isn’t something that can continue. AI and other server demand has become almost the whole story in memory. Orders from data center customers seem to have increased strongly within the last quarter. This has spread out from HBM to conventional DRAM and even into SSD sales. This memory upturn is now being sustained by the enthusiasm around AI. Its duration will be determined, mostly, by how long the optimism for AI investment continues.
– S. Hughes (short MU)