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Exceptional memory demand

Memory customers face mounting pressure

We lift our target price for Samsung Electronics (SEC) to W480,000 (from W400,000). Our valuation is based on a sum-of-the-parts (SOTP) methodology and implies a 2026F P/B of 4.4x, below the memory sector average of 6.4x. While the company’s average ROE over the past decade was only 13%, we forecast average ROE over the next three years at 46%, which we believe justifies a higher P/B multiple.

As of May, server and enterprise SSD shipment growth forecasts for 2026 have been revised up further to +22.3% and +41.5%, respectively (from +22.1% and +39.1%, respectively), despite already elevated bases. In the mobile segment, production cutbacks centered on low-end smartphones are supporting a structural rise in average DRAM content per device. Meanwhile, the rollout of Nvidia’s Vera is set to further tighten the LPDDR (SOCAMM) market.

Driven by a structural increase in LPDDR DRAM demand and SEC’s aggressive pricing policy, QoQ increases in contract prices are accelerating further compared with 1Q26. For 2Q26, we project LPDDR5X (16GB) and LPDDR4X (8GB) prices to jump 81% and 72% QoQ, respectively (vs. +58% and +57% QoQ in 1Q26).

For NAND, production capacity remains concentrated on SSDs due to strong demand, preventing any meaningful moderation in price increases for IT device storage compared with 1Q26. We forecast 2Q26 UFS (512GB) prices to rise 80% QoQ (vs. +97% QoQ in 1Q26). As SanDisk noted on its earnings call, IT device manufacturers that had delayed purchases are likely to resume buying as they adapt to the current pricing environment.

Against this backdrop, we raise our ASP assumptions for SEC. For 2Q26, 3Q26, and 4Q26, we now project DRAM ASP growth at +41%, +10%, and +6%, respectively (vs. previous forecasts of +30%, +15%, and +5%) and NAND ASP growth at +45%, +15%, and +10%, respectively (vs. previous forecasts of +30%, +15%, and +10%). While the pace of price increases should moderate in 2H26, overall price levels are likely to remain higher.

We raise our operating profit forecasts for 2Q26, 2026, and 2027 to W89tr, W372tr, and W500tr, respectively (from W75tr, W332tr, and W450tr, respectively). In an earlier report (May 4), we partially reflected the possibility of higher labor expenses by lowering our OP margin forecasts for the DS division by 3.5%p for 2026 and 3.4%p for 2027. However, we now revise these forecasts upward again by 2.5%p and 1.5%p, respectively, reflecting stronger-than-expected price increases.

Current pricing trends underscore the exceptional strength of global memory demand. For SEC, securing labor stability will remain an important factor to watch going forward.