Samsung Electronics and SK Hynix are expected to see their joint semiconductor sales top 100 trillion won for the first time this year. Analysts point to a continued “super cycle” of memory chips characterized by high global demand and low supply.
Samsung Electronics posted a record high 51-point-one trillion won in semiconductor sales last year. Meanwhile, SK Hynix saw its performance peak in 2015 when sales reached nearly 18-point-eight trillion won.
Thanks to a super cycle in memory chips, the two companies have been breaking quarterly records this year.
Samsung posted semiconductor sales of some 15-point-seven trillion won in the first quarter and 17-and-a-half trillion won in the second quarter. SK Hynix saw sales stand at nearly 6.3 trillion won during the January to March period and roughly 6.7 trillion won from April to June.
Initially, industry experts had estimated that memory chip prices would drop from the second half of the year due to a surge in the two companies’ shipments. However, strong sales projections for Apple's recently released iPhone X are expected to extend the super cycle of chips.
Additionally, demand for server and cloud memories continues to be strong.
Analyst reports this month predict that Samsung will post between 72 and 78 trillion won in semiconductor sales this year and SK Hynix’s semiconductor sales will be in the range of 28 to 29 trillion won.
The two firms’ chips sales will likely surpass 100 trillion won this year even based on the most conservative predictions.
To put that figure into context, 100 trillion won is equivalent to over six percent of South Korea’s 2016 gross domestic product. It's also about 23 percent of next year’s proposed government budget.
The two chipmakers are expected to post new highs in operating profits this year as well.
Analysts forecast that Samsung's semiconductor business will reap between 32 and 36 trillion won in operating profit while SK Hynix will post a profit of 13 to 14 trillion won.
However, there are concerns the semiconductor boom could taper off from as early as next year. If this projection is true, South Korea doesn't necessarily have an alternative industry to take the place of chips.
Chips may be the booming sector for now amid the fourth industrial revolution but critics call for the preemptive development of other mainstay sectors for the nation’s future.