Author: Peng Cheng
Recently, the global memory industry collectively released its semi-annual financial reports.
SK Hynix reported Q2 revenue of 79.32 trillion KRW, a year-on-year increase of 257%; operating profit reached 60.54 trillion KRW, surging 557% year-on-year, while net profit hit a staggering 93.92 trillion KRW, skyrocketing 1242% year-on-year. The cumulative revenue for the first half of the year exceeded 100 trillion KRW for the first time, setting a record for the best semi-annual performance in its history.
The operating profit margin reached 76%, meaning that for every $100 in revenue, $76 is directly converted into profit. Samsung Electronics posted a single-quarter operating profit of 89.5 trillion KRW, exceeding the total profit of the three years from 2023 to 2025. Micron Technology's gross profit margin surged to 84.6%. Meanwhile, in the A-share market, Longsys saw its first-half net profit increase 622 times year-on-year, DMET grew by nearly 50 times, and Biwin Storage increased by over 32 times.
This is almost the best financial performance in history, but bizarrely, after the release of these record-breaking figures, SK Hynix's stock price plummeted 11% in a single day, and Samsung Electronics' stock price fell in tandem. The income statement of memory companies is the cost sheet of downstream customers. When upstream profits inflate to historical extremes, only one question remains: who can continue to foot the bill?
01. Memory Duopoly: Revenue and Profit Hit New Highs
SK Hynix's Q2 financial report delivered the best results in its history. Revenue reached 79.32 trillion KRW, a year-on-year increase of 257%; operating profit was 60.54 trillion KRW, surging 557% year-on-year, and net profit hit a staggering 93.92 trillion KRW, skyrocketing 1242% year-on-year. The cumulative revenue for the first half of the year exceeded 100 trillion KRW for the first time, setting a record for the best semi-annual performance in its history. However, on the day the report was released, SK Hynix's stock price once fell by over 13%, wiping out approximately 20 trillion KRW in market capitalization.
The core of the contradiction lies in the price locking of long-term agreements. Hyun-Jong Song, President of the Corporate Center at SK Hynix, stated during the Q2 2026 earnings call: "Currently, we have completed the signing of long-term supply agreements with more than 10 companies, including core customers, and are simultaneously advancing cooperation discussions with other leading customers." A long-term supply agreement refers to signing a multi-year supply contract for specific chip products. The contract period varies depending on the customer and product category, with a baseline term of about 5 years. This model not only reduces operational uncertainties caused by short-term market fluctuations and consolidates the company's medium- to long-term operational foundation, but also ensures customers' stable access to memory chip capacity. While this undoubtedly secures high visibility of demand, it also eliminates the elasticity for prices to continue rising.
Samsung Electronics' financial report also set a historical record, achieving sales of 171.50 trillion KRW, a year-on-year increase of 130%; operating profit of 89.49 trillion KRW, a year-on-year increase of 1813.83%; and net profit of 71.27 trillion KRW, a year-on-year increase of 1344.46%. Among them, the Device Solutions (DS) division, responsible for memory chips and foundry businesses, posted an operating profit of 89.2 trillion KRW, reaching a historic high. Samsung Electronics stated that the sustained growth in AI server demand has driven the sales of high-end memory products such as High Bandwidth Memory (HBM), while businesses like Advanced Packaging and foundry services continue to benefit from AI infrastructure investments.
02. Domestic Memory Forces: From "Losses" to "Windfall Profits"
While overseas original manufacturers reap the AI dividends with HBM, domestic memory companies have also tasted the AI dividends.
Memory original manufacturers and design companies boast the highest profit quality. GigaDevice's first-half revenue reached 11.5 billion RMB, with a net profit attributable to shareholders of 6.9 billion RMB, a year-on-year increase of 1099%. Ingenic Semiconductor's revenue was approximately 4 billion RMB, a year-on-year increase of 77%, with a net profit attributable to shareholders of 1.079-1.282 billion RMB, a year-on-year increase of 431%-531%. DOSILICON turned losses into profits, with a net profit attributable to shareholders of 640-680 million RMB.
The profits of these companies stem from product price increases + shipment volume growth + structural market share expansion. DOSILICON stated that, benefiting from the continuous explosion in AI computing power demand and the enhanced competitiveness of domestic niche memory technologies, overseas memory original manufacturers are accelerating their exit from the niche market, leading to a clear contraction on the supply side. Meanwhile, downstream application demands in network communications, industrial control, and automotive electronics are steadily recovering, and the supply-demand gap for niche memory chips continues to widen. The supply-demand relationship in the memory chip market faced by the company shows a structural shortage, and the market prices of products have surged significantly.
Downstream module manufacturers have seen even higher profit growth. Longsys' first-half revenue was 22-25 billion RMB, with a net profit of 9.2-11 billion RMB, a year-on-year increase of 62204%-74394%; Biwin Storage's first-half revenue was 15-16 billion RMB, with a net profit of 7-7.5 billion RMB, an increase of 3200%-3422%; DMET's first-half revenue was 16-18 billion RMB, with a net profit of 5.7-6.5 billion RMB.
For module manufacturers, revenue and profit are influenced not only by downstream demand but also by the supply of upstream memory wafer capacity. Longsys stated that the company has successfully renewed wafer supply agreements (LTAs or MOUs) with several major global memory wafer original manufacturers, ensuring the supply of memory wafers and consolidating the resource foundation for future long-term development. DMET also stated that relying on long-term and stable cooperation with mainstream wafer manufacturers, the company has effectively ensured supply chain stability and production delivery pace, continuously improving profitability and significantly increasing profit levels year-on-year. Biwin Storage, on the other hand, has continuously increased investment in IC design, solutions, Advanced Packaging and testing, and testing equipment to enhance market competitiveness. It should be noted that the massive profit growth of module manufacturers is also related to inventory revaluation through "stockpiling at low prices and selling at high prices." Inventory acts as a profit amplifier when prices rise, but once prices peak or fall, it becomes an impairment bomb.
Finally, the easily overlooked controller chip manufacturers also belong to the "shovel sellers" in this market rally. Montage Technology's first-half revenue was 3.335 billion RMB, with a net profit attributable to shareholders of 1.9-2.1 billion RMB, a year-on-year increase of 63.9%-81.2%; Giantec Semiconductor's net profit attributable to shareholders was 525.3342 million RMB, a year-on-year increase of 156.07%; Maxio Technology's first-half revenue was 850 million RMB, a year-on-year increase of 39%, with a net profit attributable to shareholders of 517 million RMB, a year-on-year increase of 821%. The profit growth of controller chip manufacturers mainly stems from the surge in memory module shipments. As essential accessories, controller chips are shipped in sync and are not directly affected by inventory price fluctuations. However, due to the tight supply of memory particle capacity and significant price increases, the PC and smartphone terminal markets are under short-term pressure, and growth mainly comes from the demand brought by the AI industry. Moreover, upstream module manufacturers are also simultaneously deploying controllers. DMET has launched its self-developed PCIe/SATA dual-mode enterprise SSD controller chip, further enhancing the competitiveness and differentiation advantages of enterprise storage products.
03. Who is Paying for the Record-Breaking Profits?
The profits of memory companies are often the costs of downstream customers. These increased costs ultimately need to be paid by customers, but the cost-bearing capacity of downstream customers varies.
First are AI server manufacturers. Cloud providers are willing to pay a higher premium than smartphone manufacturers. SK Hynix's 5-year long-term agreements have been locked in with about 10 core customers; HBM capacity for 2026 is sold out, and most of the capacity for 2027 has already been booked. In 2026, the vast majority of DRAM capacity is prioritized for the AI server track. Users in this track "have to buy." The training and inference of AI large models require massive amounts of high-bandwidth memory, and the manufacturing of HBM consumes about three times the wafer capacity of traditional DRAM. Producing 1GB of HBM requires sacrificing 3GB of traditional DDR, leading to a sharp expansion of the supply gap for consumer-grade DRAM.
Next are smartphone manufacturers. The proportion of memory chips in the BOM of a complete smartphone has surged from the previous 10%-15% to over 20%, and for low-end models, it can even reach 30%-60%. According to the latest report by Counterpoint, in Q2 2026, the quarter-on-quarter price increase of smartphone DRAM memory exceeded 80%. The significant price hike of memory chips has directly restructured the material cost structure of complete smartphones, universally raising the production costs of models across all price segments and further increasing the profit pressure on smartphone manufacturers. Even for flagship models priced above $800, the BOM cost has increased by nearly 50% year-on-year. DRAM costs have officially surpassed the SoC (System on Chip) main chip, becoming the most expensive single component in flagship phones.
Third are PCs and consumer electronics. Unlike the rigid demand for AI servers, the demand for PCs and consumer electronics is collapsing ahead of schedule. In the Huaqiangbei market, a 16GB DDR4 memory stick cost over 700 RMB last month, but now sells for only 450 RMB, dropping by about 35% in a single month. The increase in DRAM contract prices narrowed from 90%-95% in Q1 to about 20% in Q3, but spot prices have already taken the lead in falling. This means that the demand collapse at the channel level has occurred before the contract prices. The memory price hike not only directly affects the memory prices of PCs and consumer electronics but also ushers in a new round of price increases for graphics cards. According to reports, multiple merchants in Huaqiangbei stated that affected by the new round of price increase notices issued by major global graphics card manufacturers, factories of major graphics card brands have currently fully implemented warehouse lockdown policies, temporarily halting bulk shipments to the outside world, and the spot supply in the entire circulation link is rapidly tightening.
Finally, there are edge AI chips. Players in this field are not passively paying the bill but are exploring using technology to hedge against costs. Longsys and AMD have jointly optimized and achieved a reduction of about 40% in DRAM usage for edge AI products. Downstream customers are using algorithm optimization and architectural innovation to permanently reduce their dependence on memory.
04. Downstream Cannot Bear It: The Supply Chain Says "No" Collectively for the First Time
In July 2026, news broke that OPPO and vivo officially rejected the Q3 2026 memory product quotes proposed by Samsung Electronics. More notably, this is not an isolated case. According to the digital blogger "Digital Chat Station," multiple top 6 domestic smartphone manufacturers have explicitly rejected memory suppliers' demands for price increases in the coming quarters. This event has been interpreted by the industry as a collective boycott by downstream terminal manufacturers against the soaring memory costs, also unveiling the prelude to a new round of price game between the smartphone supply chain and the upstream memory sector.
The divergence is not limited to consumer-end memory; disagreements have also emerged in the AI server field. Unlike consumer electronics, the memory demand for AI servers is still growing rapidly, and cloud service providers are willing to pay a premium 50% to 60% higher than smartphone manufacturers. But precisely because of this, the contradiction is deepening. Memory price hikes are squeezing the capital expenditure budgets of cloud providers, and price increases in memory and other links may force large companies to compress the procurement budget and gross profit margin space for the network side (optical communications).
When price hikes begin to cannibalize demand, the downstream sector is no longer silent. The response strategies of smartphone manufacturers have shifted from passive endurance to proactive strikes. In addition to rejecting price hikes, multiple manufacturers are simultaneously adjusting capacity plans, compressing overall shipment volumes, and cutting off low-profit product lines. In Q1 2026, Xiaomi, OPPO, and vivo took the lead in raising the prices of multiple smartphone models. This is a countermeasure of "reducing production to maintain prices"—if upstream continues to raise prices, leading to a shrinkage in terminal demand, it will ultimately reversely impact the shipment volume and revenue of memory original manufacturers. To improve its own profitability, the DS division of Samsung Electronics even refused to sign a long-term DRAM supply agreement of more than 12 months with the MX division, causing the cost of the Galaxy S26 series to skyrocket. Samsung's senior management had to intervene in the negotiations. When memory giants cannot even appease their own smartphone divisions, external customers' order rejections will only become more resolute.
The slope of the price increase is slowing down, but the trend of price hikes has not yet reversed. What is truly worth paying attention to is not when prices will peak, but how the power structure of the supply chain is changing. Behind the financial report spectacle of Q2 2026 is the fact that the profits of memory companies have inflated to a point where the downstream can no longer bear them. When no new buyers can be found, the super cycle will end in a more drastic way than imagined.