Written by: Rita

The market is concerned that the storage cycle has peaked, and the judgment given by Samsung's management is that the supply-demand ratio in 2027 will be tighter than in 2026. In a report released on September 18, 2026, after an online meeting with Samsung Electronics' management, Goldman Sachs reiterated its buy rating and included it in the conviction buy list. The target price for common stock is 490,000 Korean Won, which has an upside potential of 94.1% compared to the current stock price of 252,500 Korean Won. The target price for preferred stock is 360,000 Korean Won, with an upside potential of 86.2%.

Goldman Sachs analyst Giu Lee pointed out in the report that Samsung's management reaffirmed that storage supply and demand conditions will remain tight, with supporting factors including robust demand momentum, low fulfillment rates, and demand delays extending from 2026 to 2027. Incremental capacity will focus on DRAM, particularly High Bandwidth Memory (HBM), while the capacity for other storage products will be compressed. The supply expansion of traditional DRAM faces structural constraints.

Tight Supply and Demand for Storage Until 2027

The unmet demand in 2026 will be pushed to 2027, with supply and demand conditions in 2027 being tighter than in 2026. Long-term supply agreements provide visibility beyond 2027, and management expects favorable supply-demand conditions to last beyond 2027. Samsung’s P4 wafer fab will primarily produce 1c nanometer DRAM for HBM4 and HBM4E, while the P5 wafer fab is expected to have its first wafer output, also primarily with DRAM, in 2028. In terms of NAND, due to limited space in Korean wafer fabs, the company will focus on process migration in its Xi'an factory.

Goldman Sachs pointed out that both DRAM and NAND bit output growth face challenges. Increasing traditional DRAM capacity is difficult because new capacity is mainly allocated to HBM. The trade ratio of HBM has been increasing from generation to generation, currently at 3 to 4 to 1, with larger chip sizes further exacerbating capacity constraints. This structural change indicates that the supply discipline in the storage industry is stronger than in previous cycles, and prices and profit margins are expected to be maintained for a longer period.

Long-Term Agreements Lock in Demand

The currently signed long-term supply agreements differ from previous cycles in terms of duration, coverage, and binding nature, providing the company with financial stability and disciplined capital expenditure planning. Customers pay substantial upfront payments and deposits, proportionate to the agreed purchasing volume, encouraging customers to provide more accurate forecasts.

The remaining 30% to 40% of capacity, not bound by the long-term agreements, will serve mobile, PC, and non-AI customers, which may have upside potential in physical AI and terminal AI. Goldman Sachs believes that the proliferation of long-term agreements has changed the business model of the storage industry from spot price volatility to more predictable contract revenue. This change benefits leading firms like Samsung, enabling them to plan capacity and investments more steadily.

HBM Crowding Out Traditional DRAM Capacity

4nm foundry capacity is very tight due to the demand for HBM4 base chips, and the company is considering increasing 4nm capacity in Korea. At the same time, a new production line for 2nm nodes for HBM5 base chips is also under evaluation. The company has confirmed that equipment installation at the Taylor plant has begun, specifically for orders from American automotive customers, and is considering expanding production in the U.S. to meet potential future orders.

Goldman Sachs noted that the crowding-out effect of HBM on capacity is structural. HBM chips are larger, consume more wafers, and the trade ratio for each generation of HBM is increasing. Even if Samsung increases DRAM capacity, most of the new capacity will be absorbed by HBM, limiting the supply growth of traditional DRAM. This trend supports maintaining high storage prices.

MX Department Prioritizes Market Share

Despite facing short-term operating losses, Samsung's MX department will prioritize market share in key regions. The company anticipates that financial conditions may further deteriorate before improving, as the pressure from storage costs rises. Regarding foldable phones, the company views new entrants positively, believing that this will enhance consumer awareness and validate the foldable form.

Goldman Sachs believes that the strategy for the MX department is to sacrifice short-term profits for long-term market position. Rising storage costs exert pressure on the profit margins of the mobile business, but Samsung, as a storage supplier, can benefit from rising storage prices, partially offsetting the pressure on the mobile business. This vertical integration advantage becomes more apparent during storage upcycles.

Shareholder Returns to be Decided by Year-End

Samsung stated that it is evaluating share buybacks and dividends, with a final decision expected to be made after the performance results at year-end. Management reaffirmed that the shareholding of group-affiliated companies will not be a major factor in determining the shareholder return policy. Goldman Sachs believes that clarifying the shareholder return policy will become a potential catalyst for stock prices.

The target price provided by Goldman Sachs is based on the EV/EBITDA valuation method for the 2026 to 2027 period. The target price for common stock is 490,000 Korean Won, and the target price for preferred stock is 360,000 Korean Won, based on a 27% discount on preferred shares. Downside risks include severe deterioration of storage supply and demand, increased competition in HBM, and expanded losses in foundry operations.

If the supply-demand conditions in 2027 are tighter than in 2026, will Samsung's storage business enter a longer upcycle, and will the short-term losses in the mobile business be completely offset by storage profits?

Disclaimer

This article is a compilation and interpretation of third-party brokerage research reports (Goldman Sachs, September 18, 2026) by Trend Research, combined with publicly available market information. The ratings, target prices, earnings forecasts, and related judgments quoted in this article are the views of the analysts of that brokerage and represent only the position of their affiliated institution, not the views of Trend Research, nor do they constitute any investment advice.

The market has risks, decisions must be made independently. This article should not be used as the basis for buying or selling any securities.