Samsung HBM strength lifts forecasts despite China supply risk

By Priya Raman

What changed in the September quarter?

Samsung Electronics (005930) reported September-quarter revenue of KRW 195 trillion, up 14%, while operating margin rose 280 basis points, or 2.8 percentage points, to 55%.

Shares fell 5% after the earnings call. The decline came despite stronger operating results.

Morningstar assigns Samsung a four-star rating, no economic moat (durable competitive advantage), and a very high uncertainty rating. The uncertainty assessment limits what the quarter can prove.

The company hinted at gains in high-bandwidth memory (HBM) market share. That supported Morningstar’s prior view of improving HBM expertise. Stronger HBM prices improved the near-term outlook, but they did not remove rising long-term cyclicality risk.

What does stronger HBM pricing change?

Samsung’s comments imply an HBM market share of roughly 32%. That is in line with Morningstar’s 30% estimate for 2026.

HBM4 carries a 50% price premium to HBM3E. Negotiations for 2027 indicate prices could double. Morningstar expects stronger near-term HBM revenue as a result.

Those near-term pricing assumptions support stronger HBM revenue, but they do not settle Samsung’s competitive position across the broader semiconductor cycle and possible Chinese oversupply.

The implied share is not a reported company metric. Morningstar’s cited forecast covers 2026. Neither figure settles the later cycle.

Why did shares fall 5%?

Morningstar said: “Shares likely fell on Samsung’s view of a memory shortage till 2029 versus SK Hynix’s bullish 2030 forecast.” The note sees no change in the companies’ competitive position. It calls the discrepancy management conservatism.

The valuation conclusion remains conditional because stronger memory pricing can obscure the larger supply response that Chinese capacity additions may create later in the market.

Morningstar wrote: “We keep our fair value estimate for Samsung Electronics of KRW 310,000.” It raised the fair value for global depositary receipts (GDRs) to USD 5,798 because the Korean won strengthened.

Despite its longer-term caution, the note considers Samsung undervalued against the fair value estimate and relative to US peers. That is an assessment, not a guaranteed return.

How will forecasts change through 2028?

Morningstar raises 2027 and 2028 revenue forecasts by 12%-17% and operating-margin forecasts by 530-750 basis points on stronger near-term HBM pricing across both forecast years.

The revision rests on current pricing rather than a proven reduction in industry cyclicality. The note retains its expectation of a cycle peak in 2028.

Chinese entrants CXMT and YMTC pose a growing risk of oversupply and commoditization (loss of product differentiation). Their technological advances and state-backed expansion drive that risk. Morningstar lowers its midcycle (normalized point in the memory cycle) operating-margin forecast by 197 basis points.

The forecast therefore pairs higher near-term earnings with a lower normalized-cycle margin. The note does not quantify when Chinese oversupply would begin.

What changes in Samsung’s foundry business?

Samsung’s foundry (contract chip manufacturing) business now runs its advanced nodes at full utilization. Recent contract wins and HBM4 base-die (logic layer) production drove that utilization.

Morningstar now expects foundry to break even by the end of 2026, with the Taylor fab ramp-up further improving overall utilization rates and product mix.

The break-even forecast still lacks a revenue or margin target. The note gives no quantified contribution from foundry. It does not remove the memory cycle’s long-term supply risk.