Following TSMC, Samsung Market Cap Joins Trillion Club, Memory Chips Support Half the Business

TradingKey - Driven by the strong pull of explosive demand for AI chips, Samsung Electronics, the global memory chip leader, reached a developmental milestone—on May 6, the company's share price surged over 16% intraday to reach 270,000 Korean won, eventually closing up 14.41%, with its market capitalization surpassing 1,700 trillion Korean won (approximately $1.15 trillion), officially joining the trillion-dollar club and becoming the second Asian tech company after TSMC ( TSM) to achieve this feat.

Over the past year, alongside the explosive growth in global demand for artificial intelligence chips, the share price of Samsung Electronics, the world's largest memory chip manufacturer, has soared more than threefold cumulatively, with year-to-date gains reaching 125%.

Dave Mazza, CEO of New York-based Roundhill Investments, stated: "The significance of the trillion-dollar market cap threshold is not merely symbolic; it carries substantial weight. From a broader perspective, this reflects the market's assessment that the role of memory chips in the artificial intelligence (AI) infrastructure ecosystem is structural, rather than cyclical."

Recent reports indicate that Apple ( AAPL) is in preliminary discussions with Intel ( INTC) and Samsung, planning to include these two companies in its list of alternative foundry options for core device chips to reduce reliance on a single regional supply chain and alleviate current chip shortage pressures.

Apple executives also conducted a dedicated site visit to Samsung's advanced chip factory under construction in Texas; however, cooperation between the two parties remains in the preliminary exploration stage, and no substantive orders have been signed yet. Apple still harbors concerns regarding non-TSMC chip manufacturing technologies, and it remains uncertain whether it will ultimately introduce new foundry partners.

Influenced by this news, Intel shares surged 13% in the U.S. market overnight, while stocks in the memory sector rose collectively, which also fueled the sharp rise in Samsung shares on Wednesday.

Samsung's Memory Business Expected to Drive Continued Profitability

Just a few days ago, Samsung announced strong financial results. The memory business emerged as the undisputed core of Samsung Electronics' first-quarter performance, with the semiconductor division recording revenue of 81.7 trillion won, an 86% increase quarter-on-quarter. This also marked the first time the semiconductor division's revenue accounted for more than 50% of the group's total. Benefiting from high profit margins driven by AI data center orders, operating profit for its chip business surged 48-fold year-on-year, far surpassing market expectations.

The shortage of memory chips, price hikes, and product mix upgrades brought about by the expansion of AI data centers have collectively driven up profit margins. Samsung Electronics expects server storage demand to remain strong in the second half of the year, with AI agents accelerating demand growth, and plans to deliver HBM4E samples in the second quarter.

The company also stated that chip supply shortages will persist in the second half of the year, and the supply-demand gap for memory may further widen in 2027. Samsung previously announced that its HBM4 capacity for 2026 has been fully sold out, and analysts expect the division to maintain its record earnings momentum in the coming quarters as contract prices continue to soar.

"If investors take a look at Samsung Electronics, we think they will come to the conclusion that even if they missed out on its performance, the company's investment opportunity remains quite attractive," said Sam Konrad, investment manager at Jupiter Asset Management.

Konrad pointed out, "The memory market is currently in a state of short supply, and Samsung has indicated that the supply-demand relationship in 2027 will be even tighter than in 2026, so NAND and DRAM prices are likely to continue to rise."

Samsung Strike Crisis

While the chip business has shown explosive profitability driven by the AI wave, Samsung's internal growth structure faces a risk of imbalance, with the mobile and display divisions' margins significantly squeezed by rising raw material and supply chain costs.

The windfall from the AI boom has prompted Samsung employees to demand higher compensation and bonuses, with workers threatening an 18-day general strike later this month.

Notably, even in highly automated environments, labor shortages remain a heavy burden for production lines. A previous strike by approximately 40,000 workers sounded an industry-wide alarm as memory and foundry wafer capacities plummeted by 18.4% and 58.1%, respectively.

A deeper crisis involves semiconductor equipment operations; if routine maintenance is halted long-term due to strikes, the time cost to restart is typically double the downtime. If the union executes the 18-day strike, Samsung may need over a month to regain production momentum, creating "long-tail losses" that inject massive uncertainty into the global electronics supply chain.

Facing strike threats and potential disruptions, Samsung management is considering spinning off the semiconductor division to reshape the group's compensation logic and resolve profit distribution issues. However, divesting the most profitable unit, while addressing pay inequality, could trigger a valuation collapse and stock price decline, inevitably facing fierce resistance from shareholders.