Micron has released its first-quarter fiscal 2025 (1QFY25, ending November 28, 2024) financial results, highlighting strong performance in its HBM segment. However, a weaker-than-expected outlook has dampened market confidence, casting a shadow over South Korean rivals Samsung Electronics and SK Hynix.
South Korean media outlets Asiae.co.kr and Sedaily.com reported that Micron's 1QFY25 revenue reached US$8.71 billion, narrowly beating market expectations. However, its 2QFY25 forecast of US$7.7–US$8.1 billion significantly trails analysts' average projection of US$9 billion, raising concerns about future growth.
Memory industry: cyclical trends and global interdependencies
Performance trends in the memory industry often align, driven by its cyclical nature and the commoditization of products like DRAM and NAND. Demand shifts in key sectors, including consumer electronics, data centers, and emerging technologies such as AI and autonomous vehicles, impact all manufacturers alike.
Price fluctuations in DRAM and NAND flash memory resonate across the market, influencing all manufacturers regardless of their product mix. Moreover, shared cost structures and reliance on advanced technologies like EUV lithography create further alignment among memory producers.
External factors such as trade restrictions, geopolitical challenges, and global economic shifts amplify synchronized trends in the memory sector. Competitive dynamics and interdependent markets further deepen this alignment, as highlighted by The Wall Street Journal and Barron's.
For Samsung and SK Hynix, Micron's financial results often serve as a key indicator of market trends, heightening industry-wide apprehension.
Chinese players disrupt the DRAM market landscape
Micron noted persistent weak demand in mobile, PC, and automotive sectors through 2025, compounded by growing competition from Chinese manufacturers. Since 2024, Chinese DRAM makers have aggressively undercut DDR3 and DDR4 prices, pressuring Samsung and SK Hynix's profitability. Reports suggest these firms are now entering the high-performance DRAM segment with DDR5 production.
Ithome.com reports that Chinese manufacturers KingBank and Weihai Guangwei Composites recently launched "domestically produced" DDR5 memory on e-commerce platforms. Priced at CNY499 (approx. US$68.67) for two 16GB modules, experts believe the chips are sourced from CXMT.
China's DDR5 technology trails South Korean rivals by over three years, but substantial financial resources could enable rapid progress. In the near term, this race is expected to drive down market prices.
NAND market: uncertainty rises with Micron cuts and Kioxia expansion
Micron has announced a 10% reduction in NAND wafer starts as part of its production cut strategy, aiming to address oversupply concerns in the market. Kioxia, the world's third-largest NAND producer, has recently gone public, signaling plans to expand production capacity and accelerate next-gen product development. These developments inject additional uncertainty into the NAND market, where prices are already under downward pressure.
Earnings projections: Samsung and SK Hynix revised downward
Amid mounting market pressures, South Korean analysts have significantly downgraded fourth-quarter 2024 earnings forecasts for Samsung and SK Hynix. FnGuide data shows Samsung's fourth-quarter operating profit estimate plummeted from KRW14.8 trillion (approx. US$10.29 billion) in August to KRW9.3 trillion in December, marking a sharp 37.2% cut. SK Hynix's forecast experienced a smaller reduction, dropping from KRW8.6 trillion to KRW8 trillion, reflecting a 20% decrease.
Micron's HBM3E gains challenge Samsung and SK Hynix
With general-purpose memory profitability declining, HBM competitiveness is becoming increasingly critical. Micron has secured Nvidia's orders for its 8-layer HBM3E and revealed during its earnings call that it has started shipping to other clients, likely AMD and Intel, posing a competitive challenge to South Korean players.
Samsung's HBM3E has yet to achieve Nvidia certification, while SK Hynix is working to bolster its market dominance. Both companies are accelerating the development of HBM4 and HBM4E to stay competitive in the AI semiconductor space. However, delays in innovation, increasing HBM supply, and China's growing presence in the market could heighten competition and strain profitability.
The US government has approved up to US$6.165 billion in investment subsidies for Micron, with an agreement expected soon. In contrast, Samsung's proposed US$6.4 billion subsidy remains pending approval.
If approval is delayed past the potential inauguration of the Trump administration in January 2025, Samsung's chances of securing the subsidy may weaken, potentially impacting its competitive position and operational stability.
