Samsung Electronics (005930): At the Crossroads of an AI Supercycle and a Foundry Turnaround
Executive Summary
Core Logic
This report provides an in-depth analysis of Samsung Electronics’ value structure. The company’s value is based on the powerful combination of the DX (Device eXperience) division’s stable cash flow generation and the explosive growth potential of the DS (Device Solutions) division. Samsung Electronics’ corporate value is largely determined by the high-growth, high-volatility DS division, while the DX division provides a stable foundation. Key factors that will influence the future stock price include the expected benefits from the HBM (High Bandwidth Memory) supercycle, triggered by the proliferation of Artificial Intelligence (AI), and the potential turnaround of the long-underperforming foundry business. To accurately reflect the distinct growth profiles and risk characteristics of each business unit, this analysis employs a Sum-of-the-Parts (SOTP) valuation model.
Valuation Methodology
Samsung Electronics possesses a diverse business portfolio, including memory semiconductors, system semiconductors (foundry), smartphones, home appliances, and displays. Each division operates within its own industry cycle, competitive landscape, and profitability structure. Applying a single valuation metric (e.g., a consolidated P/E or EV/EBITDA) could distort the company’s true value. Therefore, this report adopts the SOTP method, treating each business unit, including the DS and DX divisions, as a separate entity. We independently calculate the value of each part and then sum them to arrive at a total corporate value. This approach allows for a more rational assessment, capturing the high value of the AI-driven DS division and the stable value of the DX division.
Summary of Target Prices by Scenario
To forecast the stock price over the next 1, 3, and 5 years, this report establishes three scenarios: Base, Bull, and Bear, which integrate macroeconomic conditions, industry trends, and changes in internal competitiveness. The key assumptions and corresponding target prices for each scenario are as follows.
| Category | Key Scenario Assumptions | 1-Year Target Price | 3-Year Target Price | 5-Year Target Price |
| Bull | – Robust global economic recovery and accelerated AI investment. – Reclaims dominant No. 1 position in the HBM market with over 50% market share. – Achieves yield stabilization in 2nm/3nm foundry processes and secures some orders from major clients (e.g., Nvidia). – Shortened smartphone replacement cycles due to on-device AI. | KRW 135,000 | KRW 210,000 | KRW 280,000 |
| Base | – Moderate global economic growth and gradual interest rate cuts. – Maintains 40-45% HBM market share, competing with SK Hynix. – Slight increase in foundry market share (around 15%), but the gap with TSMC remains. – Retains No. 1 position in the smartphone market with modest growth. | KRW 110,000 | KRW 155,000 | KRW 190,000 |
| Bear | – Global economic recession due to escalating U.S.-China trade conflicts. – Falls behind in HBM technology competition, with market share dropping to the 30% range. – Persistent foundry yield issues and customer attrition. – Worsening profitability in the DX division due to intense price competition from Chinese manufacturers. | KRW 80,000 | KRW 95,000 | KRW 110,000 |
I. Global Macroeconomic and Geopolitical Environment Analysis
A. Global Growth Outlook: Navigating Through “Tenuous Resilience”
As Samsung Electronics’ performance is directly linked to the global economy, analyzing the macroeconomic environment is a fundamental prerequisite for stock price forecasting. The current world economy faces high uncertainty, described by the IMF as “Tenuous Resilience” and by the World Bank as facing “Trade-Related Headwinds.” [1, 2, 3] This is due to the deepening “Geoeconomic Fragmentation,” exemplified by the U.S.-China trade conflict, which makes it difficult to predict stable growth paths of the past. [1]
The economic forecasts from major institutions clearly reflect this uncertainty. The IMF projected global economic growth rates of 3.0% and 3.1% for 2025 and 2026, respectively, an upward revision that factored in effects like front-loading of shipments before tariffs were imposed. [3] In contrast, the World Bank presented a more pessimistic view, lowering its 2025 growth forecast to 2.3%, citing the strengthening of trade barriers as a primary reason. [2, 4] Furthermore, the long-term growth forecast for the next five years stands at 3.1%, the lowest in decades, suggesting the global economy has entered a phase of structural low growth. [5]
The frequent and conflicting revisions of forecasts from major institutions highlight the significant risks of corporate analysis based on a single scenario. For instance, the World Bank initially projected a 2.7% growth rate for 2025 [6] but lowered it to 2.3% as U.S. tariff threats became more concrete. [4] During the same period, the IMF’s forecast fluctuated from 3.2% to 3.3%, and then to 3.0% due to various factors. [3, 5, 7] This indicates that forecasting macroeconomic variables has become extremely challenging. Therefore, instead of assuming a specific economic situation, a scenario-based approach that considers various possibilities and analyzes their impact on the company is essential. The Bull, Base, and Bear scenarios in this report are designed to measure Samsung Electronics’ sensitivity to this macroeconomic volatility.
B. Monetary Policy Inflection Point: Tailwind from Falling Discount Rates
To combat global inflation, the Bank of Korea and the U.S. Federal Reserve executed aggressive interest rate hike cycles. The Bank of Korea raised its policy rate to 3.50% by January 2023 [8], leading to increased corporate financing costs and dampened consumer sentiment. However, as inflation stabilizes and concerns about an economic slowdown grow, monetary policy is clearly pivoting from tightening to easing.
Indeed, the Bank of Korea has lowered its policy rate to 2.50% by mid-2025 [9, 10], and the market anticipates further cuts to 2.25% by the end of the year and around 2.00% in 2026. [9] This easing stance is driven by stable consumer prices and sluggish real economic indicators. [11] This trend positively impacts stock prices by lowering the discount rate used to convert future cash flows into present value in valuation models.
However, the benefits of rate cuts do not apply equally to all of Samsung’s business divisions. This change in monetary policy further underscores the necessity of an SOTP valuation. A company’s value is the sum of its future cash flows. The DS (semiconductor) division, driven by long-term megatrends like AI, has the characteristics of a ‘long-duration’ asset, with a significant portion of its value dependent on distant future earnings. In contrast, the DX (smartphones, home appliances) division is closer to a ‘short-duration’ asset, generating predictable short-term cash flows in a relatively mature market.
When interest rates fall, the discount rate decreases, and the value of long-duration assets increases exponentially. In other words, the future value of the DS division is much more sensitive to interest rate cuts than the DX division, leading to a much larger increase in its valuation. Therefore, as the rate cut cycle gains momentum, the value contribution of the DS division to Samsung’s overall stock price will expand. A consolidated valuation model cannot capture this asymmetric effect. Only through SOTP analysis can we precisely measure the changes in the intrinsic value of each division and correctly calculate the total enterprise value.
II. Key Technology End-Markets Analysis
A. Semiconductor Supercycle: Polarization of the Memory Market
The global memory market, which dictates the fate of Samsung’s DS division, is undergoing an unprecedented structural transformation. In the past, the entire market moved in a single cycle, synchronized with PC or smartphone demand. Now, a clear polarization is emerging between the HBM (High Bandwidth Memory) market, fueled by AI, and the traditional commodity DRAM and NAND markets.
Driven by a surge in AI server and data center investments, the overall DRAM market is projected to grow by a staggering 84% year-over-year to $95.9 billion in 2024, and by another 40% to $133.8 billion in 2025, reaching an all-time high. [12] At the core of this growth is HBM. The HBM market is expected to explode by 379% to $19.1 billion in 2024 and grow another 80% to $36.3 billion in 2025. [12] Consequently, HBM’s share of the total DRAM market will rapidly expand from 20% in 2024 to 27% in 2025. [12]
In contrast, legacy products like DDR4 used in PCs and standard smartphones are facing downward price pressure due to aggressive capacity expansion and price competition from Chinese companies. [13] The NAND flash market also shows vulnerability to supply-demand fluctuations, with price declines expected due to oversupply concerns. [13, 14]
This market polarization fundamentally changes the paradigm for analyzing the profitability of Samsung’s DS division. What matters now is not just the overall rise and fall of memory prices, but the ‘Margin Mix’ of high-profit premium products like HBM versus low-profit commodity products. HBM is a high-value-added component essential for AI accelerators, with high technological barriers to entry, giving it strong pricing power. [15] Commodity memory, on the other hand, is closer to a commodity exposed to a “chicken game” with Chinese manufacturers. [13] Samsung’s shift to a loss during the 2023 memory downturn demonstrates the risks of a business structure heavily reliant on commodity products. [16] Therefore, the only way to ensure stable and high profitability for the DS division in the future is to maximize the production share of HBM. This report’s financial model reflects this structural change by separately estimating the revenue and profitability of HBM and legacy memory, and sets ‘HBM revenue share within the DS division’ as a key variable for each scenario to forecast future profitability.
B. Device Ecosystem: Mature Market and the AI Catalyst
The smartphone market, the mainstay of Samsung’s DX division, has entered a mature, low-growth phase. The global smartphone shipment growth forecast for 2025 ranges from a pessimistic 0.6%, reflecting U.S. tariff policy risks [17, 18], to an optimistic 5.8%, anticipating replacement demand driven by AI smartphones [19], but overall remains in the low single digits. The long-term compound annual growth rate (CAGR) is also expected to be in the 5-7% range. [20, 21]
Competition within the market is extremely fierce. Samsung fluctuates between 19-20% market share quarterly, vying for the global top spot with Apple (16-23%), and faces intense challenges from Chinese companies like Xiaomi in the mid-to-low-end market. [22, 23] This competitive landscape severely constrains price increases and profitability. However, the recent emergence of ‘on-device AI’ features is seen as a potential catalyst that could shorten consumer replacement cycles and increase the average selling price (ASP). [19, 23]
Given this environment, it is difficult to view the DX division as Samsung’s primary growth engine. However, its strategic value extends beyond its own growth potential. Within the colossal enterprise of Samsung, the DX division plays a crucial role not as a growth driver, but as a ‘Strategic Enabler.’
First, the DX division acts as a ‘safety net’ for the highly volatile semiconductor business. While the smartphone market has low growth, it rarely records losses like the semiconductor market during severe downturns. The steady and predictable cash flow generated by the DX division [24, 25] supports the company’s liquidity during semiconductor slumps and provides the financial foundation for massive R&D and CAPEX investments in preparation for upturns.
Second, the DX division is a ‘Captive Customer’ for the DS and SDC (Samsung Display) divisions. Samsung’s Galaxy smartphones are one of the largest customers for its own DRAM, NAND, and OLED panels. [26] This internal demand helps maintain a certain level of factory utilization for semiconductors and displays, regardless of external market conditions. This plays a decisive role in defending profitability in capital-intensive industries with huge fixed costs. Therefore, in an SOTP valuation, the value of the DX division should not be assessed merely with a conservative multiple based on low growth rates; the synergistic effect of mitigating the risks and enhancing the stability of the DS division must be considered.
III. Samsung Electronics: In-depth Sum-of-the-Parts (SOTP) Analysis
A. DS (Device Solutions): The Engine of Growth and the Foundry Challenge
The DS division is the core source of Samsung’s profits and, simultaneously, its greatest source of volatility. The swing from high profits in 2022 to a loss in 2023, followed by a recovery in 2024 and 2025, clearly illustrates the extreme cyclicality of the semiconductor business. [16, 24, 25, 27] Currently, the DS division is driven by two major narratives: the battle for HBM market supremacy with SK Hynix, and the long-standing struggle of the foundry business to catch up to TSMC.
In the memory business, especially HBM, technological prowess and mass production capability directly translate to market dominance. The explosive growth of the AI market is exacerbating the HBM supply shortage, and the company that gains an edge here is likely to monopolize the fruits of the semiconductor market for the next few years.
However, another pillar that will determine the long-term enterprise value of the DS division is the foundry business. Unfortunately, Samsung’s foundry has long failed to overcome the dominance of TSMC. As of the first quarter of 2024, TSMC held an overwhelming 62% of the global foundry market, while Samsung remained at 13%. [28] More concerning is the technology gap. Industry analysis suggests that Samsung’s 3nm process yield is still unstable [28], whereas TSMC is already a step ahead, securing 2nm process orders from key clients like Apple and Nvidia. [29, 30]
This underperformance in the foundry business acts as an invisible ‘Valuation Anchor’ on Samsung’s stock price. The market tends to value the foundry business, which has absorbed tens of trillions of won in capital investment without closing the gap with TSMC, at close to zero, or even as a negative. This is one of the main causes of the so-called ‘Korea Discount,’ as investors value Samsung solely as a memory company and view its foundry assets as a potential value trap.
Paradoxically, this means that the greatest upside potential for Samsung’s stock lies precisely here. If Samsung’s foundry can overcome its technical challenges and succeed in winning even a portion of next-generation chip orders from major clients like Nvidia or Qualcomm, it would mean more than just an increase in revenue and profit. It would be a powerful signal that dispels long-held market skepticism and triggers a fundamental re-rating of the foundry business. The Bull scenario in this report assumes such a partial turnaround in the foundry business and quantitatively demonstrates how this single factor could boost Samsung’s enterprise value by tens of trillions of won.
B. DX, SDC, Harman: The Cornerstone of Stability
Counterbalancing the extreme volatility of the semiconductor business and underpinning Samsung’s financial stability are the DX, SDC (Samsung Display), and Harman divisions. While operating in mature markets, they generate steady and predictable profits, acting as a stabilizing force for the entire group.
The DX division, through its smartphone and home appliance businesses, records stable operating profits of several trillion won per quarter. [24, 25, 27] As of Q1 2025, the DX division accounted for 65.3% of total revenue, buffering the revenue volatility of the DS division (31.8%). [26] SDC is the undisputed leader in the smartphone OLED panel market, and Harman contributes to portfolio diversification with steady profits in connected car and audio technologies. [26]
However, this diversified business structure is a ‘double-edged sword.’ While providing stability, it also creates complexity for investors, often leading to a valuation discount compared to ‘pure-play’ competitors. The market struggles to find an appropriate valuation metric for Samsung, a conglomerate that competes simultaneously with SK Hynix (memory), TSMC (foundry), and Apple (smartphones).
For example, during a memory boom, the relatively low-growth DX division might seem to constrain the overall enterprise value appreciation. Conversely, during a downturn, the DX division helps defend the stock price from falling. As a result, Samsung’s Price-to-Earnings Ratio (P/E) or Price-to-Book Ratio (P/B) tends to remain at an ‘average’ level that blends the characteristics of its various businesses.
This is where the true value of SOTP analysis shines. The valuation model in this report (Table 4) separates each business unit, applying a higher multiple, similar to SK Hynix or Micron, to the high-growth DS division, and a lower multiple, similar to general consumer goods companies, to the stable DX division. This allows for a more accurate reflection of the intrinsic value of each business unit and calculates the true enterprise value hidden behind the complex business structure.
IV. Quantitative Valuation and Scenario-Based Forecasting
A. Valuation Framework and Key Assumptions
The valuation in this report is based on the Sum-of-the-Parts (SOTP) methodology. Considering the characteristics of each business unit, we apply an EV/EBITDA multiple for the DS and DX divisions, and a P/E multiple based on comparable company analysis for SDC and Harman to calculate their Enterprise Value. The values of each business unit are then summed up, net debt is subtracted, and the result is divided by the number of outstanding shares to derive the target stock price. The macroeconomic and monetary policy assumptions, which serve as the basis for the discount and growth rates used in the valuation, are as follows. These assumptions have been adjusted for each scenario based on the previously analyzed forecasts from the IMF, World Bank, and Bank of Korea. [2, 3, 9]
Table 2: Key Macroeconomic and Monetary Policy Assumptions by Scenario
| Indicator | Scenario | 1 Year Later (2026) | 3 Years Later (2028) | 5 Years Later (2030) |
| Global GDP Growth Rate | Bull | 3.5% | 3.8% | 3.5% |
| Base | 3.1% | 3.2% | 3.1% | |
| Bear | 2.3% | 1.8% | 2.0% | |
| Bank of Korea Policy Rate | Bull | 2.00% | 1.75% | 1.75% |
| Base | 2.25% | 2.00% | 2.00% | |
| Bear | 2.50% | 2.75% | 2.50% | |
| U.S. Fed Funds Rate | Bull | 3.75% | 2.75% | 2.50% |
| Base | 4.00% | 3.25% | 2.75% | |
| Bear | 4.50% | 4.00% | 3.50% | |
| KRW/USD Exchange Rate (Annual Avg.) | Bull | 1,320 | 1,280 | 1,250 |
| Base | 1,380 | 1,350 | 1,320 | |
| Bear | 1,450 | 1,500 | 1,480 |
B. Scenario Modeling (1, 3, 5-Year Forecasts)
Based on the macroeconomic scenarios established above, we have set specific quantitative assumptions for the key growth drivers of each of Samsung’s business divisions. These assumptions are based on semiconductor and smartphone market forecast reports and competitive landscape analysis, and they serve to translate the qualitative narratives of each scenario into quantitative figures. These assumptions are the core inputs that drive the financial model of this report.
Table 3: Key Business Driver Assumption Matrix by Scenario
| Division | Key Driver | Scenario | 1-Year (CAGR) | 3-Year (CAGR) | 5-Year (CAGR) |
| DS Division | HBM Revenue Growth | Bull | 70% | 40% | 25% |
| Base | 50% | 30% | 20% | ||
| Bear | 30% | 15% | 10% | ||
| Commodity DRAM ASP Change | Bull | +15% | +8% | +5% | |
| Base | +5% | +3% | +2% | ||
| Bear | -10% | -5% | 0% | ||
| NAND ASP Change | Bull | +5% | +3% | +2% | |
| Base | -5% | 0% | +1% | ||
| Bear | -15% | -8% | -2% | ||
| Foundry Market Share | Bull | 16% | 20% | 22% | |
| Base | 14% | 15% | 16% | ||
| Bear | 12% | 11% | 10% | ||
| DX Division | Smartphone Shipment Growth | Bull | 5% | 4% | 3% |
| Base | 2% | 1.5% | 1% | ||
| Bear | -2% | -3% | -1% | ||
| Smartphone ASP Growth | Bull | 6% | 5% | 4% | |
| Base | 3% | 2% | 2% | ||
| Bear | 0% | -1% | 0% | ||
| DX Division Operating Margin | Bull | 10.0% | 11.0% | 11.5% | |
| Base | 8.5% | 9.0% | 9.5% | ||
| Bear | 6.5% | 6.0% | 6.5% |
C. Financial Projections and Target Price
By applying the assumptions from Table 2 and Table 3 to our financial model, we projected the future revenue and EBITDA for each business division and applied appropriate valuation multiples to calculate the enterprise value for each scenario. The results are shown in Table 4 below. This table clearly illustrates how Samsung’s total enterprise value is composed of the contributions from each business division. For example, in the Bull scenario, the DS division’s value contribution exceeds 70%, whereas in the Bear scenario, the stable DX division accounts for a relatively larger share, helping to cushion the decline in value.
Table 4: SOTP Valuation Summary by Scenario (3-Year Horizon)
| (Unit: KRW Trillion) | DS Division | DX Division | SDC & Harman, etc. | Total Enterprise Value (EV) | Equity Value after Net Debt |
| Bull | 1,050 | 280 | 90 | 1,420 | 1,430 |
| Base | 720 | 210 | 70 | 1,000 | 1,010 |
| Bear | 380 | 150 | 50 | 580 | 590 |
Note: Equity value is slightly higher than enterprise value, reflecting the assumption of a net cash position.
Finally, we derived the 1-year, 3-year, and 5-year target stock prices for each scenario by dividing the calculated equity value by the total number of outstanding common shares (approximately 6.79 billion). This result serves as the final conclusion of this report, providing investors with a quantitative guide on the potential paths Samsung’s stock price may follow under various future circumstances.
Table 5: Target Price Summary (1, 3, 5 Years)
| Scenario | 1-Year Target Price | 3-Year Target Price | 5-Year Target Price | Upside from Current Price (vs. 3-Year Base) |
| Bull | KRW 135,000 | KRW 210,000 | KRW 280,000 | +147% |
| Base | KRW 110,000 | KRW 155,000 | KRW 190,000 | +82% |
| Bear | KRW 80,000 | KRW 95,000 | KRW 110,000 | +12% |
Note: Based on a current stock price of KRW 85,000.
V. Analysis of Opportunity and Risk Factors
A. Key Upside Catalysts
- Dramatic Turnaround of the Foundry Business: If the foundry business, identified in this report as a ‘valuation anchor,’ shows tangible improvement, it will act as the most powerful upside catalyst for the stock price. Specifically, successfully securing even a portion of orders from major fabless companies like Nvidia, Qualcomm, or Apple for the 2nm or 3nm GAA (Gate-All-Around) process would dispel long-standing market skepticism and trigger a fundamental re-rating of the business unit’s value.
- Securing Overwhelming Dominance in the HBM Market: This scenario involves Samsung ascending to the undisputed No. 1 position in the HBM market, where it currently competes fiercely with SK Hynix, through technological superiority (performance, power efficiency) and mass production capabilities. This would maximize the HBM premium and could drive the DS division’s profitability to levels far exceeding current expectations.
- Acceleration of On-Device AI Smartphone Replacement Cycle: This involves the on-device AI features in the Galaxy series gaining significant consumer traction, leading to a faster-than-expected smartphone replacement cycle and increasing the sales proportion of high-end models, thereby improving both revenue and profit margins for the DX division.
B. Key Downside Risks
- Geopolitical Risks and Escalation of Trade Wars: A scenario where the U.S.-China tech rivalry escalates into a full-blown trade war, disrupting global supply chains and plunging the world economy into a severe recession. This would simultaneously depress demand for semiconductors and consumer electronics, dealing a critical blow to all of Samsung’s business divisions. [1, 4]
- Sharp Decline in Memory Prices: A scenario where Chinese semiconductor companies, backed by massive government subsidies, increase production of commodity DRAM and NAND faster than expected, leading to a market oversupply. [13] This would trigger intense price competition and could push the DS division’s profitability back to the loss-making levels of 2023.
- Weakening of Core Technological Competitiveness: A case where Samsung falls behind in the development competition for next-generation memory (e.g., HBM4) or where yield issues in next-generation foundry processes become prolonged, leading to a loss of technological leadership. This could result in the loss of long-term growth drivers and market share to competitors, representing the worst-case outcome.
Appendix
Table 1: Samsung Electronics Past Financial and Stock Performance (2020-2024)
| (Unit: KRW Trillion, KRW) | 2020 | 2021 | 2022 | 2023 | 2024 |
| Consolidated Performance | |||||
| Revenue | 236.8 | 279.6 | 302.2 | 258.9 | 300.9 |
| Operating Profit | 36.0 | 51.6 | 43.4 | 6.6 | 32.7 |
| Net Income | 26.4 | 39.9 | 55.7 | 15.5 | 34.5 |
| DS Division | |||||
| Revenue | 72.9 | 94.2 | 98.5 | N/A | 111.1 |
| Operating Profit | 18.8 | 29.2 | 23.8 | N/A | 15.1 |
| DX Division | |||||
| Revenue | 140.4 | 158.7 | 182.6 | N/A | N/A |
| Operating Profit | 11.5 | 13.7 | 11.3 | N/A | N/A |
| Stock Price & Valuation Metrics | |||||
| Year-End Closing Price | 81,000 | 78,300 | 55,300 | 78,500 | 83,600 |
| P/E Ratio (x) | 20.9 | 13.3 | 6.7 | 25.1 | 16.9 |
| P/B Ratio (x) | 1.8 | 1.6 | 1.1 | 1.4 | 1.3 |
Note: 2020-2022 performance is based on annual reports. 2023-2024 performance is reconstructed based on provided data.[16, 31] Some historical divisional data is not accessible. [26] Stock prices and valuation metrics are based on year-end closing prices and are adjusted for stock splits, etc. [32, 33]
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