Korean media reports that "Samsung and SK Hynix are expected to continue cutting NAND flash production this year" to pursue maximum profits.

Despite surging demand driven by artificial intelligence, South Korea’s two major memory chip giants, Samsung Electronics and SK Hynix, will continue to cut NAND flash output this year. This supply strategy is expected to drive NAND prices higher across servers, PCs, and mobile devices, bringing profit margin increases comparable to DRAM for both companies. On Tuesday, citing data from market research firm Omdia, Korea’s Chosun Ilbo reported that Samsung Electronics’ NAND wafer output this year will drop from last year’s 4.9 million units to 4.68 million, even lower than the reduced production levels implemented in 2024 due to deteriorating profitability. SK Hynix’s NAND output will also fall from about 1.9 million units last year to 1.7 million this year. The two companies together account for more than 60% of the global NAND flash market. This production cut decision comes as competition in inference AI, led by companies like NVIDIA, intensifies. According to Citi data, NVIDIA’s next-generation AI accelerator “Vera Rubin,” set for mass production in the second half of this year, will have a solid-state drive capacity of 1,152TB, more than 10 times that of the existing “Blackwell.” Estimated shipments for this product are 30,000 units this year and 100,000 units next year, which will create 34.6 million TB and 115.2 million TB of new demand in 2026 and 2027, respectively. Notably, the global memory chip supercycle driven by the AI boom has already translated into record profits, as Samsung Electronics and SK Hynix are awarding their largest ever performance bonuses. Samsung Electronics’ semiconductor Device Solutions division has confirmed that eligible employees will receive a bonus equal to 47% of their basic annual salary this month. SK Hynix’s dividends and bonuses are even more aggressive, with average bonuses expected to exceed 140 million won, setting a new record. Capital Expenditures Shift Toward High-Profit DRAM Industry consensus is that Samsung Electronics and SK Hynix’s cuts in NAND output reflect a shift in capital expenditure priorities to the most profitable DRAM. Additionally, as AI data centers’ demand for high-capacity SSDs grows, the transition from current triple-level cell technology to quad-level cell technology, which is better suited for AI data centers, will inevitably result in natural yield losses. This transition involves multiple factors such as equipment installation, stabilization periods, and initial production yields. Reportedly, executives at Samsung Electronics and SK Hynix see no reason to rush into increasing NAND production. One semiconductor industry insider said it is still unclear whether Samsung’s and SK Hynix’s NAND output cuts are deliberate or a natural consequence, but in any case, the benefits of these cuts will peak this year. Prices Expected to Rise Across the Board Major market research firms expect NAND prices to rise across the board from the first quarter of this year and are closely watching key suppliers’ output adjustments. TrendForce estimates that contract prices for NAND flash in the first quarter will rise by 33% to 38% compared to last quarter, noting that Samsung Electronics, SK Hynix, and others continue to maintain a conservative production stance. IDC also predicts this year’s NAND supply growth rate will be around 17%, below the average of recent years. Analysts say that with NAND market demand surging thanks to AI this year, supply controls by major suppliers Samsung Electronics and SK Hynix could deepen shortages across AI servers, mobile devices, PCs, and other sectors. For their NAND business, both companies have faced long-term profitability deterioration, forcing them to focus on price defense. Now, they can leverage this memory chip supercycle to maximize profits. Samsung and SK Hynix Award Record-Breaking Bonuses Samsung Electronics and SK Hynix are awarding their largest ever performance bonuses in years, marking that the global memory chip supercycle driven by the AI boom has translated to historic profits. The generous dividends from these Korean chip giants directly reflect the significant profitability improvements brought by surging demand for AI chips such as high-bandwidth memory (HBM). Samsung Electronics’ semiconductor Device Solutions division has confirmed that eligible employees will receive bonuses equal to 47% of their basic annual salary this month. This percentage is close to Samsung’s internal cap of 50% and stands in stark contrast to 2023, when the division’s bonus rate was zero due to the chip market slump, highlighting the strength of the industry recovery. SK Hynix’s bonus program is even more aggressive, scrapping a long-standing cap of 10 months’ base salary and instead allocating 10% of operating profit for this year’s profit-sharing plan. Based on an estimated annual operating profit of 45 trillion won and 33,000 employees, average bonuses are expected to top 140 million won, a historic high. These record bonuses come as both companies massively shift capacity toward HBM production. As HBM consumes about three times as much wafer capacity as standard DRAM, this transition has tightened supply for general-purpose memory like DDR5, driving overall prices higher and giving chipmakers a dual profit growth engine. Risk Warning and Disclaimer Markets are risky, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the individual investment objectives, financial situations, or needs of specific users. 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