Samsung AI Memory Supercycle's Counterintuitive Signal: Why Is DRAM More Profitable Than HBM?

On April 29, 2026, Samsung Electronics (005930.KS) delivered a quarterly financial report that could rewrite the history of Korean corporations.

Consolidated revenue reached 133.87 trillion won (approximately $90.1 billion), up 69.2% year-over-year, and up 42.7% quarter-over-quarter, setting a new record for single-quarter revenue. Operating profit was 57.23 trillion won (about $38.4 billion), a surge of 756.1% year-over-year and 185.1% quarter-over-quarter, exceeding the company's internal expectations and beating the market consensus of 55.28 trillion won.

A more intuitive comparison: in all of 2025, Samsung Electronics' operating profit totaled 43.6 trillion won. This means that just one quarter of 2026 already surpassed the entire previous year's total.

Within its profit structure, the Device Solutions (DS) division responsible for semiconductor business became the absolute profit engine. This division's operating profit for the quarter reached 53.7 trillion won, accounting for about 93.9% of the company's total operating profit, compared to only about 1.1 trillion won in the same period last year. The DS division's operating profit margin was approximately 65.7%, which is the core driver behind Samsung's overall operating margin rising to about 42.8%.

After the earnings release, multiple international investment banks quickly raised their target prices. Goldman Sachs increased the target from 205k won to 260k won, maintaining a "Buy" rating; Citibank on May 12 raised the target from 300k won to 460k won and initiated a 90-day upside catalyst watch; Nomura on May 18 raised the target from 340k won to 590k won.

However, what truly made the market ponder was not these financially fully priced figures, but a casual remark from management during the earnings call: at this point in time, the profitability of traditional DRAM is actually higher than that of HBM.

This statement directly conflicts with the mainstream market understanding. In the narrative of the "AI memory supercycle," HBM is regarded as the most profitable and most barrier-rich track. Why would management release such an "counterintuitive" signal in the company's best quarterly report in history? The underlying business logic behind this is far more complex than the financial data itself.

An "Counterintuitive" Profit Structure

The judgment that traditional DRAM is more profitable than HBM is not an isolated statement from Samsung but is supported by clear industry data.

According to the latest report released by semiconductor research firm TrendForce on May 27, 2026, influenced by annual bargaining mechanisms, the wafer output value and profit margins of HBM chips were overtaken by DDR5 RDIMM in Q1 2026. TrendForce had previously pointed out in January that server DRAM prices and profit margins had already surpassed HBM, becoming the most profitable item.

Specifically, the pricing cycle of HBM differs structurally from standard DRAM. HBM contracts are usually negotiated on an annual basis, with longer lock-in periods, and prices lag behind spot market adjustments; whereas traditional DRAM (like DDR5) has a more responsive price discovery mechanism, reflecting supply and demand gaps more quickly.

From the price data perspective, this contrast is even more intuitive. In Q1 2026, general-purpose DRAM contract prices increased by 90% to 95% quarter-over-quarter, while NAND Flash rose by 55% to 60%. Against the backdrop of large-scale HBM capacity occupation, supply of traditional DRAM shrank even faster than demand growth, creating a positive spiral of "the scarcer, the more expensive, and the more profitable."

The overall performance of the global DRAM market also confirms this trend. According to data released by Counterpoint Research on May 27, 2026, global DRAM revenue in Q1 surged 80% quarter-over-quarter and 260% year-over-year, reaching a record $97 billion, just shy of the $1.34M mark for a single quarter. Samsung maintained its leading position with a 38% market share in DRAM revenue.

Behind this profit margin inversion, there is also a deeper capacity logic: capacity squeeze effect. HBM chips have significantly larger die sizes than standard DRAM of the same generation, consuming far more wafer capacity. As HBM shipments increase, a large portion of advanced process capacity is occupied, causing effective supply of traditional DRAM to continue shrinking. The supply-demand imbalance, combined with more flexible pricing mechanisms, ultimately drives traditional DRAM margins to surpass the relatively rigid pricing of HBM.

HBM Track: Competition Under the Aura

To understand the profit inversion between traditional DRAM and HBM, we need to look at the competitive landscape of the HBM market.

In the key generation HBM4, Samsung achieved the world's first mass production and shipment of HBM4 in February 2026, delivering commercially to customers. The company expects HBM sales in 2026 to exceed three times last year's, with HBM4 revenue surpassing half of total HBM revenue from Q3 onwards.

In terms of technological iteration, Samsung is also accelerating the development of HBM4E. At the GTC conference in March 2026, Samsung publicly showcased an HBM4E sample, with a single-pin rate of 16 Gbps and total bandwidth exceeding 4.0 TB/s, about 21% higher than HBM4. The first batch of HBM4E engineering samples began production in Q2, prioritized for key customers' system-level validation.

However, market share data reveals a different picture. According to TrendForce, in 2026, SK Hynix is expected to hold about 50% of the HBM market, with Micron increasing to 28%. The global DRAM revenue ranking from Counterpoint Research shows Samsung leading with 38% market share, followed by SK Hynix at 29% and Micron at 22%.

While Samsung has an early lead in HBM4 mass production, SK Hynix benefits from a longer-term HBM partnership with Nvidia, maintaining an advantage in supply allocation. This "first-mover advantage" is not solely determined by technical parameters but also by long certification cycles, joint validation history, and supply chain trust built over time. Whether Samsung can break through in HBM4 and subsequent generations depends on its ability to maintain technological pace and convert initial production advantages into substantial customer supply share growth.

Pricing Power Game: Annual Agreements and Profit Lag

TrendForce's May 2026 report reveals the core contradiction in HBM pricing mechanisms: HBM contracts for 2026 adopt an annual pricing framework, with prices locked in as early as late 2025. When the overall DRAM market entered a severe shortage in Q1 due to AI demand explosion, HBM contract prices remained "fixed" at relatively low levels, unable to adjust upward like standardized DRAM in real time.

Additionally, the HBM market in 2026 saw the entry of new suppliers, increasing supply and providing some support to buyers in contract negotiations, further suppressing short-term upward price elasticity for HBM.

This lagging pricing framework has already triggered strong reactions from suppliers. TrendForce notes that as HBM4 supply negotiations for 2027 begin in Q2 2026, manufacturers will significantly raise HBM prices to reflect supply-demand imbalance and higher manufacturing costs of the new generation. The higher profits of traditional DRAM give suppliers more bargaining power—if HBM profits remain lower than traditional products in the long term, manufacturers lack economic incentives to expand HBM supply, creating a game that pushes buyers to accept higher HBM contract prices.

SK Hynix's strategy differs. According to TrendForce, amid RDIMM prices surpassing HBM, SK Hynix has explicitly stated it is "not pursuing short-term profits but aiming for long-term balance between HBM and conventional DRAM." This differentiated stance suggests that Samsung and SK Hynix may be diverging in capacity allocation strategies: Samsung prefers to maximize short-term gains during high-margin traditional DRAM periods, while SK Hynix emphasizes consolidating HBM's long-term supply position.

May 2026 Labor Strike: Supply Risks in the Supercycle

In a market environment where capacity is already tight, Samsung Electronics faced its largest labor conflict since its founding in May 2026. The nationwide Samsung union announced an 18-day general strike plan. The union demanded that 15% of annual operating profit be allocated to employee performance bonuses, but management only agreed to 10% and refused to institutionalize the bonus system.

On May 18, the Suwon District Court partially approved Samsung's strike injunction request, requiring that during the strike, safety-related personnel and obligations be maintained, and production raw materials not be compromised; violations would incur a daily fine of 300 million won. On May 20, labor-management mediation ultimately broke down, but a temporary salary agreement was reached in late May. After a vote, 73.7% of union members approved the agreement, avoiding the planned large-scale strike.

The deeper root of this strike lies in the imbalance of profit distribution during the AI cycle. In Q1, Samsung's operating profit surged 756%, but chip employees felt they had not received proportional returns from this AI-driven profit explosion. Meanwhile, SK Hynix had already reached an agreement with unions in September 2025, removing the bonus cap (previously capped at 1,000% of base salary) and including 10% of annual operating profit into a company-wide bonus pool for ten years. It is estimated that in 2026, SK Hynix employees could receive bonuses of 600 million to 700 million won per person, while Samsung's chip division employees earn less than a third of that. This pay gap has led to about 200 core Samsung engineers defecting to SK Hynix over the past few months.

From an industry perspective, if subsequent strikes impact production rhythm in any form, the consequences will quickly propagate through the global semiconductor supply chain. JPMorgan estimates that a large-scale internal strike at Samsung could reduce 2026 operating profit by about 2.1 trillion to 3.5 trillion won and cut semiconductor revenue by about 1% to 2%. Korea's KB Securities predicts that if only about 30-40% of union members participate in the strike, it could disrupt about 3-4% of global DRAM supply. In the context of a continuing supply-demand gap, any substantial capacity loss would further push up the storage chip price center.

The Three Layers of the Supercycle Structure

Integrating the above information, a clear three-layer structure of the current AI memory supercycle emerges:

First layer: Structural demand-driven. Unlike past short-term recoveries driven by consumer electronics replacement cycles, this storage rally is driven by a structural demand re-evaluation from AI training, inference, and large data center expansion. Nomura Securities' research report states: as AI semiconductor demand shifts from training to inference workloads, memory demand is entering an exponential expansion phase. In inference scenarios, the demand for KV-cache memory is a product of multiple variables such as user base, participation duration, AI task complexity, and token consumption, meaning memory demand could grow thousands of times over the next five years.

Second layer: Capacity squeeze and supply rigidity. Large-scale expansion of HBM has occupied a significant portion of advanced process wafer capacity, directly squeezing the effective supply of traditional DRAM. After experiencing a downturn, storage manufacturers have become more cautious with capital expenditure, and new capacity releases typically take 12-18 months. IDC China Vice President Zhou Zhengang predicts this storage price increase cycle will extend beyond 2026, possibly into 2027 or 2028.

Third layer: Reallocation of pricing power. As cloud service providers sign long-term supply agreements locking in low prices, overall DRAM prices in 2026 show a "hard to fall, easy to rise" structure. Meanwhile, the annual pricing framework for HBM faces a fundamental reset, with 2027 contract negotiations expected to see price increases far exceeding previous market expectations. TrendForce explicitly states that manufacturers will dynamically balance capacity allocation based on profit comparisons between HBM and traditional DRAM.

The interaction among these three layers determines the unique nature of this supercycle: it is not merely a demand-driven boom but a "disciplined prosperity" constrained by supply rigidity—manufacturers, aiming to maximize profits, are motivated to maintain rather than break the current supply-demand structure. This makes the cycle's sustainability and stability markedly different from the traditional "boom-overcapacity-crash" storage cycle.

Conclusion: Internal Tensions of the Supercycle

Samsung's Q1 2026 financial report appears as a perfect footnote to the "AI memory supercycle"—record-high revenue and profit, doubling growth rates, and tripling HBM shipments. But beneath these dazzling numbers, the remark about "traditional DRAM profitability exceeding HBM" during the earnings call reveals an internal tension often overlooked in the supercycle narrative.

This tension manifests on multiple levels: the profit margin inversion between traditional DRAM and HBM, the lagging nature of HBM's annual pricing mechanism and the upcoming contract price reset, the ongoing market share and technological race between Samsung and SK Hynix, and the internal game between AI profit explosion and profit distribution. These tensions are not a negation of the supercycle but are key clues to understanding its unique characteristics.

From an investment perspective, Samsung's current valuation narrative is at an important turning point. After the market fully digests the explosive growth in profit volume, the next focus will shift to the health and sustainability of profit structures—whether HBM contract prices can catch up in 2027, whether labor risks can be institutionalized, and whether HBM market share can achieve breakthrough growth. The evolution of these variables will determine whether Samsung Electronics can transition from a "cycle beneficiary" to a "structural leader" in the AI memory supercycle.