Bank of America expects that since SK Hynix dominates the market, Samsung's HBM3e supply Nvidia will have little impact on SK Hynix's earnings in the 2024/25 fiscal year; however, if Samsung HBM4 certification is successful, it will have a clear negative impact on Hynix's 2026 earnings, and the current forecast success rate is low.
If Samsung HBM3e passes Nvidia certification, how will it stir up the competitive landscape of the HBM market?
According to recent media reports, Samsung Electronics has passed or is about to pass Nvidia's HBM3e certification, and is expected to begin supplying Nvidia in the next quarter or fourth quarter.
The Bank of America analyzed the impact of Samsung's HBM3e certification. In a Tuesday report, it was pointed out that although Samsung has made some progress, SK Hynix will maintain strong growth in the next few years due to its dominant market position and high profit margins. Follow-up attention should be paid to the development progress of HBM4.
Due to SK Hynix's market dominance, the supply of Samsung HBM3e to Nvidia is expected to have little impact on SK Hynix's 2024/25 earnings;
However, if Samsung's HBM4 certification is successful, it will have a clear negative impact on Hynix's 2026 earnings, but currently the predicted success rate is low.
Bank of America stated:
Samsung may confirm this news during the second quarter earnings conference call on July 31. We expect Samsung's HBM3e sales in 2024 and 2025 to be 0.5 billion and 2.4 billion US dollars, respectively, accounting for 10% and 34% of HBM's total sales.
Although Samsung will begin shipping HBM3e to Nvidia in the third or fourth quarter, sales may not increase significantly in the short term, and SK Hynix's share of the HBM market will remain above 50% in 2025.
Bank of America analysis shows that SK Hynix HBM's profit margin is higher than Samsung's:
More than 60% of Nvidia Blackwell GPU orders in 2025 were obtained by SK Hynix, and Samsung currently dominates HBM2e and GDDR6. In terms of HBM's operating profit margin, Samsung is about 40% and Hynix is about 60%. The price and profit margin of HBM3e are higher than HBM2e.
Bank of America further listed three possible scenarios and their potential impact on SK Hynix's profits:
Samsung HBM3e certification was successful: Samsung was certified by Nvidia in the third or fourth quarter of 2024, which is in line with our current forecast and has no impact on Hynix's 2024/25 earnings.
Samsung's HBM3e certification failure: It had a single-digit percentage impact on Hynix's earnings in the second half of 2024 and 2025, as Hynix's market dominance has been established, and Nvidia will adjust prices and shipments for 2025.
Samsung HBM4 certification was successful: If HBM4 is successfully launched using hybrid bonding technology (16-layer DRAM chip stacking, no non-conductive film), it will have a clear negative impact on Hynix's earnings in 2026, but currently the predicted success rate is low.
Overall, Bank of America expects the global HBM market to continue to grow, mainly driven by SK Hynix's HBM3 and HBM3e.
Global HBM sales are expected to grow from $1.6 billion in 2023 to $26.6 billion in 2027, with an average annual growth rate of 59%.
SK Hynix has begun mass production of HBM3e in the first quarter of 2024, and plans to develop and mass-produce HBM4 in 2025. It is estimated that HBM3e will account for 24% of total DRAM sales in 2024.
Samsung's contribution to HBM3e and HBM4 is expected to remain low in 2024-25. If Samsung's HBM3e certification fails, it will provide Hynix with an opportunity to increase its market share. Furthermore, it is expected that Samsung's HBM4 manufacturing yield will remain uncertain until 2026.