South Korean media reports that "Samsung and SK Hynix are expected to continue reducing NAND flash production this year in pursuit of profit maximization."

Despite the 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 production this year. This supply strategy is expected to drive NAND prices up across various sectors, including servers, PCs, and mobile devices, bringing profit margins for both companies comparable to those of DRAM.

On Tuesday, the South Korean newspaper Chosun Ilbo cited data from market research firm Omdia, reporting that Samsung Electronics' NAND wafer production will decrease from 4.9 million units last year to 4.68 million units this year, even lower than the production cut level implemented in 2024 due to deteriorating profitability. SK Hynix's NAND production is also expected to drop from approximately 1.9 million units last year to 1.7 million units this year. Together, the two companies account for over 60% of the global NAND flash market.

This production cut decision comes amid intensified competition in inference AI led by companies like NVIDIA. According to Citigroup data, NVIDIA's next-generation AI accelerator "Vera Rubin," which will enter mass production in the second half of this year, will have a solid-state drive capacity of 1,152TB, more than ten times that of the existing "Blackwell." The product is expected to ship 30,000 units this year and reach 100,000 units next year, creating additional demand of 34.6 million TB and 115.2 million TB in 2026 and 2027, respectively.

It is worth mentioning that the global storage chip supercycle driven by the AI boom has translated into historic profits, with Samsung Electronics and SK Hynix issuing the 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 base annual salary this month. SK Hynix's dividends and bonuses are even more aggressive, with the average bonus expected to exceed 140 million Korean won, setting a new historical high.

Capital Expenditure Shifts to High-Profit DRAM

Industry insiders generally believe that Samsung Electronics and SK Hynix's reduction in NAND production reflects a shift in capital expenditure priorities towards the most profitable DRAM.

Additionally, as the demand for high-capacity SSDs in AI data centers grows, the transition from existing triple-level cell technology to the more suitable quadruple-level cell technology for AI data centers will inevitably result in natural yield losses. This transition involves multiple factors, including equipment installation, stabilization periods, and initial production yields.

Reports indicate that executives at Samsung Electronics and SK Hynix see no reason to rush to increase NAND production. A semiconductor industry insider stated that it is currently unclear whether the NAND production cuts by Samsung Electronics and SK Hynix are intentional or a natural outcome, but in any case, the benefits from the production cuts will peak this year.

Price Expectations Rise Across the Board

Major market research firms expect NAND prices to rise comprehensively starting in the first quarter of this year, closely monitoring supply adjustments from key suppliers.

TrendForce predicts that NAND flash contract prices will increase by 33% to 38% in the first quarter compared to the previous quarter, noting that companies like Samsung Electronics and SK Hynix are maintaining a conservative stance on NAND production. IDC also forecasts that this year's NAND supply growth rate will be around 17%, below the average level of recent years Analysts indicate that, given the surge in demand in the NAND market this year driven by AI, the supply control by major suppliers Samsung Electronics and SK Hynix may exacerbate shortages across various fields such as AI servers, mobile devices, and PCs. For the NAND business, both companies have long faced deteriorating profitability and have had to focus on price defense; now they can leverage this super cycle of storage chips to maximize profits as much as possible.

Samsung and SK Hynix Issue Record Bonuses

Samsung Electronics and SK Hynix are issuing the largest performance bonuses in years, marking the transformation of the global storage chip super cycle driven by the AI boom into historic profits. The generous dividends from these two South Korean chip giants directly reflect the significant increase in profitability brought about by the surge in 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 base annual salary this month. This ratio is close to Samsung's internal cap of 50%, contrasting sharply with the zero bonus rate in 2023 due to the sluggish chip market, highlighting the strength of the industry's recovery.

SK Hynix's dividend is even more aggressive, as the company has eliminated the long-standing cap of 10 months' base salary and instead allocated 10% of its operating profit for this year's profit-sharing plan. Based on an expected annual operating profit of 45 trillion won and 33,000 employees, the average bonus is expected to exceed 140 million won, setting a new historical high.

These record bonuses are being issued at a time when both companies are massively shifting their production capacity towards HBM. Since HBM consumes about three times the wafer capacity of standard DRAM, this transformation has led to tight supply of general memory such as DDR5, driving overall prices up and providing a dual profit growth impetus for chip manufacturers