Milestone moment! Samsung Electronics enters the trillion-dollar club in the storage industry, with continued growth expected in a high-boost market.

On Wednesday morning, Samsung Electronics welcomed a milestone moment. As of the time of writing, the stock price has surged more than 12%, pushing its market value over $1 trillion, making it the second Asian company to reach the $1 trillion market value level after Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. At the same time, led by the semiconductor sector including Samsung Electronics and SK Hynix, the South Korean KOSPI index soared over 5%, reaching above 7000 points for the first time, closing at 7327.70 points at the time of writing. On the news front, it was reported that Apple Inc. is considering cooperating with Intel Corporation and Samsung Electronics to produce its main device chips. The report stated that Apple Inc. is in preliminary discussions with Intel Corporation and Samsung Electronics on commissioning them to produce its main device chips. Meanwhile, Apple Inc. executives have also visited a state-of-the-art chip factory under construction by Samsung Electronics in Texas. Sources revealed that the negotiations between the two parties are in a very early stage and no orders have been placed yet. Samsung Electronics was previously a partner in manufacturing iPhone chips for Apple Inc., and is currently producing more peripheral components for products such as the iPhone. However, Samsung Electronics still lags behind Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR in the wafer foundry market, ranking second. Signs of easing tensions in the Middle East have also boosted investor risk appetite. On the evening of May 5th, local time, U.S. President Trump announced on social media that the U.S. action plan to allow stranded ships through the "Freedom Plan" in the Strait of Hormuz, which was launched the day before, will be temporarily suspended. Trump stated that "at the request of Pakistan and other countries" and given the "great military success" achieved by the U.S. against Iran, and with "major progress in reaching a comprehensive and final agreement with Iran representatives," "we" have agreed that the maritime blockade of Iranian ports will continue to be fully effective, while the "Freedom Plan" will be temporarily suspended for a short period of time, "to see if the above agreement can be finalized and signed." The U.S. military launched the diversion operation called "Freedom Plan" on May 4th, stating that it will guide stranded ships out of the Strait of Hormuz. This action has triggered strong reactions from Iran, once again escalating tensions in the Middle East. Samsung Electronics, along with another storage chip giant SK Hynix, and the wafer foundry giant Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, are at the core of a transformation. This transformation is making Asia a key pillar of the global artificial intelligence ecosystem, combining the dominant role of chip manufacturing with the expanding data infrastructure. As investors bet on the continued strong demand for advanced chips and computing power, this transformation has also driven strong gains in Asian technology stocks. Dave Mazza, CEO of New York-based Roundhill Investments, said: "The significance of the $1 trillion market value threshold is not just symbolic, but has substantial significance. From a broader perspective, this reflects the market's judgment that the role of storage chips in artificial intelligence (AI) infrastructure is structural, rather than cyclical." Q1 operating profit nearly eight times year-over-year, storage business as core engine Samsung Electronics' financial report released at the end of last month shows that in the first quarter, it achieved revenue of 133.9 trillion Korean won, a year-on-year increase of 69% and a quarter-on-quarter increase of 43%. The profit performance is even more remarkable. In the first quarter, Samsung Electronics achieved an overall operating profit of 57.2 trillion Korean won, an increase of 184.6% quarter-on-quarter and 756% year-on-year. The storage business became the undisputed performance core of Samsung Electronics in the first quarter, with the semiconductor business unit achieving revenue of 81.7 trillion Korean won, an 86% quarter-on-quarter increase. Statistics show that this is the first time the semiconductor business unit's revenue accounts for over 50% of the group's total revenue. The company's semiconductor business unit mainly includes two major businesses: storage chips and wafer foundry. In the first quarter, storage chip revenue reached 74.8 trillion Korean won (a quarter-on-quarter increase of 101.62%), while wafer foundry revenue was 6.9 trillion Korean won (quarter-on-quarter flat). The operating profit of the semiconductor business unit in the first quarter was 53.7 trillion Korean won, compared to only about 1.1 trillion Korean won in the same period last year, with a year-on-year increase of over 48 times, contributing to 93.9% of Samsung Electronics' total operating profit of 57.2 trillion Korean won in the first quarter. The shortage of storage chips brought about by the expansion of AI data centers, coupled with price increases and product structure upgrades, have collectively raised profit margins. Samsung Electronics' single-quarter operating profit has already surpassed the total profit of 57.2 trillion Korean won for the full year of 2025, marking a structural leap in its profitability. Samsung Electronics expects strong server storage demand to continue in the second half of the year, with AI applications accelerating demand growth, and plans to deliver HBM4E samples in the second quarter. The company also stated that the shortage of chips will continue in the second half of the year, and the storage supply-demand gap may further widen in 2027. The strong demand from large tech companies for building AI data centers has constrained the supply of storage chips, leading to price increases in high-end and mainstream storage chips, and has spurred the current "storage supercycle" starting from the second half of 2025. Samsung Electronics is undoubtedly one of the winners of this "storage supercycle" - after doubling its stock price in 2025, it has accumulated over 116% in gains this year. Sam Konrad, an investment manager at Jupiter Asset Management, said: "If investors conduct in-depth research on Samsung Electronics, we believe they will conclude that even if they missed the previous increase, this investment opportunity is still attractive. Currently, the storage market is in short supply, and Samsung Electronics has stated that the supply-demand balance in 2027 will be even tighter than in 2026, so NAND and DRAM prices may continue to rise." Strike crisis as the biggest drag! Profit may be eroded, operations may be interrupted However, the rising stock price of Samsung Electronics is facing a test from a strike crisis. The dispute between Samsung Electronics management and its employees has prompted more analysts to express concerns about its profit prospects, especially after SK Hynix reached a milestone agreement last year to increase its bonus payouts. Samsung Electronics was already lagging behind SK Hynix in high-margin high-bandwidth memory (HBM) chip business, and the labor dispute poses a challenge to its efforts for revival. It is reported that the huge profits resulting from the booming storage industry have not benefited frontline employees. The Samsung union is currently demanding that the company distribute 15% of its annual operating profits in bonuses, and has threatened to launch an 18-day strike from May 21 to June 7 if their demands are not positively addressed. The union previously rejected the management's proposal to allocate 10% of the operating profit for bonuses and a 6.2% raise. Park Sooncheol, CFO of Samsung Electronics, stated in a previous financial report conference call that the company "is handling labor issues in accordance with the law and regulations, and will continue to prioritize dialogue with the union to achieve a friendly solution." He also added, "Even if there is a strike, the company plans to deal with it within the legal framework through dedicated teams and response systems to minimize production interruptions." The severe labor dispute faced by Samsung Electronics could impact the already tense global supply of storage chips. A large-scale strike by about 40,000 Samsung employees on April 23 resulted in a 18.4% reduction in storage wafer production capacity and a drastic 58.1% drop in foundry wafer production capacity. This strike has proven that even with highly automated storage production lines, the absence of 40,000 people can result in nearly one-fifth of production capacity loss, while labor-intensive foundry production lines can be directly reduced by nearly sixty percent. If routine setup and maintenance work on semiconductor equipment is halted for an extended period, the time needed for normal operations to resume may be twice as long. This means that if the union does launch an 18-day strike, Samsung Electronics may need up to 36 days (over a month) to fully restore normal production capacity. This will undoubtedly severely impact Samsung Electronics and even the global semiconductor supply chain. Facing the imminent threat of a strike and potential ongoing operation interruptions, senior executives at Samsung Electronics are even evaluating the possibility of spinning off the semiconductor business unit. However, divesting the most profitable semiconductor business unit, while fundamentally addressing internal disputes over compensation, is likely to significantly damage the company's value, cause a drop in stock prices, and inevitably lead to strong opposition and resistance from group shareholders. Analysts led by Peter Lee from Citigroup lowered Samsung Electronics' target stock price from 320,000 Korean won to 300,000 Korean won on April 30th. The analysts stated that while they believe Samsung Electronics is a long-term beneficiary of the storage market growth, the "provisions related to bonuses intensified by the strike" may erode its profitability.