Korean media reported that

# Source: Wall Street Insights

By Zhao Ying

According to reports, Samsung Electronics will cut its annual NAND wafer output from 4.9 million units last year to 4.68 million units in 2026, a level even lower than the production reduction implemented in 2024 amid deteriorating profitability. SK Hynix will also slash its NAND production from around 1.9 million units last year to 1.7 million units this year. Collectively, the two companies account for over 60% of the global NAND flash memory market. TrendForce expects the contract prices of NAND flash memory in the first quarter to rise by 33% to 38% quarter-on-quarter.

Despite the surging demand driven by artificial intelligence, Samsung Electronics and SK Hynix, South Korea's two major memory chip giants, will continue to reduce NAND flash memory production this year. This supply strategy is expected to drive a sustained rise in NAND prices across sectors such as servers, PCs, and mobile devices, bringing the two companies profit margin improvements comparable to those of DRAM.

On Tuesday, South Korea’s *Chosun Ilbo*, citing data from market research firm Omdia, reported that Samsung Electronics will lower its annual NAND wafer output from 4.9 million units last year to 4.68 million units in 2026, which is even below the production cut level introduced in 2024 due to worsening profitability. SK Hynix will also decrease its NAND production from approximately 1.9 million units last year to 1.7 million units this year. Together, the two firms hold more than 60% of the global NAND flash memory market share.

This production reduction decision comes amid intensifying competition in inference AI led by companies such as NVIDIA. According to Citi data, NVIDIA’s next-generation AI accelerator "Vera Rubin", which will enter mass production in the second half of this year, boasts a solid-state drive capacity of 1,152 TB, more than 10 times that of the existing "Blackwell". The product is expected to ship 30,000 units this year and 100,000 units next year, which will generate additional demand of 34.6 million TB in 2026 and 115.2 million TB in 2027 respectively.

Notably, the global memory chip super-cycle driven by the AI boom has translated into historic profits, with Samsung Electronics and SK Hynix distributing their largest performance bonuses in years. Samsung Electronics’ semiconductor division Device Solutions has confirmed that eligible employees will receive a bonus equivalent to 47% of their basic annual salary this month. SK Hynix’s dividends and bonuses are even more aggressive, with the average bonus expected to exceed 140 million won, a record high.

## Capital Expenditure Shifts to High-margin DRAM

It is widely believed in the industry that Samsung Electronics and SK Hynix’s NAND production cuts reflect a shift in capital expenditure priorities towards DRAM, which delivers the highest profitability.

In addition, as demand for high-capacity SSDs in AI data centers grows, the transition from the existing Triple-Level Cell (TLC) technology to the Quad-Level Cell (QLC) technology that is more suitable for AI data centers will inevitably result in natural production losses. This transition involves multiple factors such as equipment installation, stabilization periods, and initial production yields.

Reports indicate that executives at Samsung Electronics and SK Hynix see no reason to rush into increasing NAND production. A semiconductor industry insider said it remains unclear whether the NAND production cuts by Samsung Electronics and SK Hynix are intentional or a natural outcome, but in any case, the gains from reduced output will peak this year.

## Price Expectations Rise Across the Board

Major market research institutions anticipate a comprehensive uptick in NAND prices starting from the first quarter of this year, and are closely monitoring supply adjustments by key vendors.

TrendForce forecasts that the contract prices of NAND flash memory in the first quarter will climb 33% to 38% quarter-on-quarter, noting that companies including Samsung Electronics and SK Hynix are maintaining a conservative stance on NAND production. IDC also predicts that the global NAND supply growth rate will stand at around 17% this year, lower than the average level in recent years.

Analysts stated that given the surging demand in the NAND market driven by AI this year, supply controls by major vendors Samsung Electronics and SK Hynix may exacerbate shortages across AI servers, mobile devices, PCs, and other sectors. For their NAND businesses, which have long suffered from deteriorating profitability and had to focus on price defense, the two companies can now capitalize on this memory chip super-cycle to maximize profits as much as possible.

## Samsung and SK Hynix Award Record Bonuses

Samsung Electronics and SK Hynix are distributing their largest performance bonuses in years, marking the transformation of the global memory chip super-cycle driven by the AI boom into historic profits. The hefty dividends from these two South Korean chip giants directly reflect the significant improvement in profitability brought by the surging demand for AI chips such as High Bandwidth Memory (HBM).

Samsung Electronics’ semiconductor division Device Solutions has confirmed that eligible employees will receive a bonus equivalent to 47% of their basic annual salary this month. This ratio is close to the 50% internal ceiling at Samsung, standing in stark contrast to the 0% bonus rate for the division in 2023 amid a downturn in the chip market, highlighting the strength of the industry recovery.

SK Hynix’s dividend policy is even more aggressive. The company has scrapped its long-standing cap of 10 months of basic salary for bonuses, instead allocating 10% of its operating profit to the profit-sharing plan this year. Based on an expected annual operating profit of 45 trillion won and 33,000 employees, the average bonus is projected to exceed 140 million won, a record high.

These record bonus payouts coincide with the two companies’ large-scale capacity shift towards HBM production. Since HBM consumes approximately three times the wafer capacity of standard DRAM, this transition has led to tight supply of general-purpose memory products such as DDR5, driving up overall prices and creating a dual profit growth driver for chipmakers.

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