China's CXMT tops global memory chip profitability, surpassing Samsung Electronics and SK hynix

Chinese memory chipmaker CXMT has posted the highest operating profit margin among the world's six major memory chip companies — surpassing Samsung Electronics, SK hynix and Micron — as surging AI demand continues to lift the memory chip sector. Analysts say the results signal that Chinese firms are rapidly expanding their footprint in a global market long dominated by South Korean, American and Japanese players.

The Nikkei reported Friday (local time) that CXMT recorded an operating profit margin of 82 percent in the second quarter of this year (April–June), topping Micron's 80 percent (March–May), SanDisk's 78 percent, SK hynix's 76 percent and Kioxia's 74 percent. It also surpassed Samsung Electronics' semiconductor business margin of 70 percent.

The Nikkei based its comparison on EBIT — earnings before interest and taxes, the equivalent of operating profit — drawing on data from QUICK, FactSet and each company's own disclosures.

CXMT primarily produces DRAM, a type of temporary storage chip, and counts Chinese tech giants Alibaba, ByteDance and Tencent among its major customers.

CXMT's operating profit for the April–June period jumped to about 1.9 trillion yen ($12.3 billion), swinging from a loss of roughly 29 billion yen in the same period a year earlier. Sales grew to approximately 2.3 trillion yen — about 10 times the year-earlier level — the highest growth rate among the six companies tracked.

The sharp improvement in profitability was driven largely by a surge in prices for commodity DRAM chips.

"SK hynix, Samsung Electronics and Micron have been concentrating their production capacity on high bandwidth memory for AI servers," the Nikkei said. "In the process, supply of commodity DRAM used in PCs and gaming consoles has tightened, sending DDR5 prices sharply higher. CXMT, with its heavy exposure to commodity DRAM, has been the biggest beneficiary of these market conditions."

Differences in contract structures between HBM and DDR5 also played a role. HBM is often sold under annual supply agreements with hyperscalers, insulating suppliers from short-term spot price swings. DDR5, by contrast, is more closely tied to prevailing market prices, meaning price increases feed through to earnings more quickly.

Taiwan-based market research firm TrendForce said HBM profitability had begun to fall below that of DDR5 since the first quarter. Okamoto, a senior executive partner at KPMG FAS, said that "in the current environment, the higher a company's share of commodity DRAM sales, the more it stands to benefit from improving market conditions."

As profitability improves, CXMT's capacity to invest is also growing. Its free cash flow — the sum of operating and investing cash flows — reached approximately 2.2 trillion yen for the first half of the year, turning positive and improving by about 2.8 trillion yen compared with the same period a year earlier.

CXMT plans to use proceeds from its initial public offering, along with government support, to expand production. It is increasing capacity in Hefei, in China's Anhui province, and is pursuing construction of a new factory in Shanghai.

Market expectations for CXMT's growth potential are also rising. According to QUICK and FactSet, CXMT's market capitalization — excluding treasury shares — stands at 87 trillion yen, overtaking Tencent to become the largest on China's stock market. That is roughly three times Kioxia's market capitalization of 31 trillion yen.

A gap is also visible in price-to-earnings ratios. Because memory chip earnings tend to be highly volatile, the forward PER of Samsung Electronics, SK hynix and Kioxia remains in the single digits, while CXMT's is approaching 20 times.

The advance of Chinese memory chipmakers extends beyond CXMT. Yangtze Memory Holdings — the parent of NAND flash producer Yangtze Memory Technologies, also known as YMTC — has filed for a stock listing, underscoring the broader momentum building in China's memory chip industry.

Analysts warn that if CXMT and YMTC leverage their growing financial strength to aggressively expand capital investment at a time when global memory supply is already tight, the competitive dynamics of the existing memory market could be significantly disrupted.

The Nikkei cautioned that if Chinese chipmakers ramp up capacity and then launch a low-price offensive, they could amplify memory price volatility and potentially reshape a market order long centered on South Korea, the United States and Japan.