Samsung's HBM dominance puts world's top annual operating profit within reach

Samsung Electronics set a new record Thursday by becoming the first technology company in the world to post quarterly operating profit exceeding 100 trillion won ($74.7 billion), driven by its memory chip business, drawing fresh attention to what its full-year results may look like.

Samsung Electronics announced its preliminary third-quarter earnings Thursday, reporting cumulative operating profit of 254.13 trillion won for the January-through-September period.

The securities industry expects Samsung Electronics' fourth-quarter operating profit to surpass 110 trillion won, setting yet another record. Combined, full-year operating profit is projected at around 370 trillion won.

The consensus estimate for Nvidia's operating profit in fiscal year 2027 — covering February 2026 through January 2027 — stands at $268.86 billion (360.11 trillion won).

A direct comparison is limited by the different accounting periods, but analysts say the trajectory puts Samsung Electronics in a position to potentially overtake Nvidia and claim the top spot globally for annual operating profit.

While the consumer electronics and TV businesses have seen widening losses in the second half of the year, analysts say the semiconductor division's extraordinary performance — riding an unprecedented boom — will drive the company's record-breaking full-year results.

Samsung Electronics posted an overall operating margin of 55.1 percent in the third quarter. Narrowed to memory chips alone, however, the operating margin is estimated to have reached the 70 to 80 percent range.

The securities industry estimates that Samsung Electronics' third-quarter operating profit from DRAM and NAND exceeded 80 trillion won and 30 trillion won, respectively, with operating margins for each surpassing 80 percent and 70 percent.

Meritz Securities said in a report Thursday that Samsung Electronics' memory chip operating profit in the third quarter likely reached 111.9 trillion won.

The HBM business has particularly gained full momentum, steepening the growth curve for semiconductor earnings. Sixth-generation HBM4, which entered full-scale mass production in the third quarter, is leading the top-line expansion.

At its second-quarter conference call in July, Samsung Electronics said HBM4 sales in the third quarter would more than triple from the second quarter, and that HBM4 would account for more than 60 percent of total HBM revenue in the second half of this year.

NAND is also sustaining its growth momentum, led by enterprise solid-state drives benefiting from AI-driven demand. Although the sharp strengthening of the won during the third quarter was expected to weigh on export earnings, analysts say Samsung offset that impact through higher memory chip selling prices.

The memory business's dominant profitability across both DRAM and NAND has been strong enough to absorb losses from the foundry division as well.

The foundry business is showing signs of recovery, centered on its 4-nanometer process, which handles mass production of the base die for HBM4 and Nvidia's AI inference chip "Grok 3." However, the Taylor factory in Texas has entered initial operation, and the resulting increase in fixed costs is estimated to have pushed the foundry division to an operating loss of 1.5 trillion won ($1.12 billion) in the third quarter.

While the Device Solutions (DS) division continues to set quarterly earnings records, the Device eXperience (DX) division, which oversees the consumer products business, remains in the red.

The securities industry estimates the DX division's operating loss in the third quarter reached as much as 3 trillion won, with even conservative projections putting the figure between 1 trillion won and 2 trillion won. That marks a widening from the 800 billion won operating loss recorded in the second quarter.

Particularly notable is the deepening loss at the Mobile eXperience (MX) division, which handles the smartphone business, as component costs have risen sharply. The securities industry estimates the MX division's third-quarter operating loss approached as much as 2 trillion won.

Surging memory chip prices have driven up production costs, making price increases unavoidable while also dampening consumer demand. Samsung Electronics raised the domestic selling price of its Galaxy S26 series by between 149,600 won and 276,100 won ($206) earlier this month — the second price increase for a smartphone launched in March, coming just seven months after its release.

The Visual Display (VD) and Digital Appliances (DA) divisions, which handle TVs and home appliances, are also struggling with profitability as costs rise. With component prices expected to keep climbing in the near term due to semiconductor supply shortages, a clear breakthrough appears difficult in the short run. Intensifying competition from Chinese manufacturers adds further pressure.

DX division management faces the additional challenge of managing employee morale amid growing discontent over performance bonuses. While the DS division posted a record operating profit of around 110 trillion won in the third quarter, the DX division's losses have fueled frustration over the widening gap in performance-based pay.

Roh Tae-moon, chief executive and head of the DX division, met Tuesday with the new leadership of Samsung Electronics' Donghaeng labor union, which is composed primarily of DX division employees, to open a channel of communication. He is also scheduled to hold a town hall meeting called "DX Connect" later this month to take questions from employees.

Attention is focused on what turnaround strategy and business plan Roh will present at the meeting, which is open to all DX division employees.