DDR5 now brings more profit than HBM, according to leading memory manufacturers

Short Summary

In December of last year the head of Micron Technology admitted that profitability in producing classic DRAM (DDR5) is higher than when releasing HBM. He reiterated this conclusion in the report for the most recent fiscal quarter. The company’s competitors show similar financial results.

Key Facts

Metric DDR5 HBM Profitability (approx.) 80 % 60 %
- In the last quarter Micron’s overall margin rose from 75 % to 81 %, confirming increased profitability not only in the HBM segment.
- Samsung, as the largest memory manufacturer, has felt similar trends since the end of last year.

Why DDR5 Prices Are Rising?

1. DRAM demand – increasing demand for standard memory initially drove up DDR5 prices because their supply became limited.
2. Production shift – manufacturers are mass‑switching to HBM, leaving fewer resources for DDR5. This led to higher DDR5 prices to a level where its sale becomes more profitable.
3. Low cost of DDR5 – production costs for DDR5 are substantially lower than those for HBM, so the margin between revenue and expense is higher, enhancing profitability.

Technological Leadership

- South Korean companies (SK hynix, Samsung) outpace Chinese manufacturers in HBM technology by about three years.
- If prices remain high, Chinese competitors may cement themselves in the DDR market. However, U.S. sanctions could limit their capabilities.

Contract Strategies

- Samsung plans to enter long‑term contracts (3–5 years) with fixed volumes and pricing tied to current market levels. Clients must make large upfront payments; their accounting will depend on price dynamics.
- Micron also uses long‑term agreements that include research work: new HBM types will be tailored to specific customer requirements. The company focuses on comprehensive supply for data centers (DDR5 + HBM).

Future and Outlook

- New manufacturing facilities are scheduled to come online no earlier than the end of next year.
- With continued growing demand, memory manufacturers’ margins will keep rising.
- SK hynix is seeking innovative ways to stabilize prices, but the effectiveness of these measures remains unknown.