SK hynix reported an operating margin of 76 per cent for the second quarter of 2026, the largest quarter it has ever filed. The KOSPI fell through July anyway. We went looking for what the selling was made of, and the primary documents point at margin debt rather than at earnings.
Last verified: 4 August 2026. Built from the SK hynix quarterly release, two Federal Register rules and statements from the Financial Supervisory Service and the Financial Services Commission, then Counterpoint Research for the industry margin comparison. The margin-debt figures move monthly and we expect them to change. The quarterly results and the export-control rules are settled.
Editor’s opinion
We would buy this drawdown, and the reason is the mechanism rather than the price
Our view is that accumulating Samsung Electronics and SK hynix into this decline is a defensible strategy. Note what that rests on. We are not saying the shares are cheap, because we have done no valuation work and this article contains none. We are saying the thing that pushed them down is not the thing that determines what they earn.
The strongest point is the sequence. SK hynix filed its largest quarter on record, and the shares fell after it. Meanwhile the Financial Supervisory Service documented margin loans rising from 27.3 trillion won to 37.3 trillion in six months, and average daily forced liquidations rising more than sevenfold. The Financial Services Commission named leveraged products as the driver of the volatility and moved to cap them. The selling has a documented mechanism, and earnings are not in it.
What argues the other way
Four things do, and one of them is confirmed damage. Samsung and SK hynix lost Validated End User status for their Chinese fabs effective 31 December 2025, which the Federal Register establishes directly. Net profit of 93.9 trillion won exceeded operating profit of 60.5 trillion, so a large non-operating item is doing work we cannot assume repeats.
Counterpoint Research puts the whole industry at 75 to 80 per cent margins, which makes 76 per cent a function of memory pricing rather than of execution, and pricing turns. And margin debt was still 37.3 trillion at the end of June, so we cannot show the liquidation has finished.
Three of those four are statements about the future. The drawdown already happened. The VEU revocation is real, and it is confined to the China fabs.
Andrew Lee. This section argues a view rather than establishing a fact. It is not a forecast and not a recommendation, and the material it draws on is listed in the sources below.
The quarter was the largest SK hynix has filed
SK hynix reported revenue of 79.3187 trillion won and operating profit of 60.5426 trillion for the second quarter of 2026. That is an operating margin of 76 per cent. Revenue rose 257 per cent against the same quarter of 2025 and operating profit rose 557 per cent.
| Quarter | Revenue | Operating profit | Margin |
|---|---|---|---|
| Q2 2025 | 22.232tn won | 9.2129tn won | 41% |
| Q1 2026 | 52.5763tn won | 37.6103tn won | 72% |
| Q2 2026 | 79.3187tn won | 60.5426tn won | 76% |
Three consecutive quarters of expansion, and the margin roughly doubled across a year. These are company-filed figures, not estimates.
A 76 per cent operating margin is not evidence of a moat. Counterpoint Research estimates the three large memory makers all ran between 75 and 80 per cent in the quarter, with Micron near 81. That tells you the memory price did this, and a price that moves this far up can move down. We are using the results to date the selling, not to project the next quarter.
What CXMT has not closed
The market’s stated fear is that CXMT has caught the Korean makers. We examined that separately and found a gap that is wide in the two places that matter. Its volume process sits roughly where Samsung and SK hynix were in 2019. On high bandwidth memory it is about two generations behind, and CXMT’s own exchange filings do not carry an HBM roadmap.
We are not restating that evidence here. It runs to eleven sources and it has its own article: CXMT has not caught Samsung and SK hynix. What matters for this piece is narrower. Nothing in that record changed between the June high and the July decline. The gap was the same width before the selling as after it.
That is the test we apply to every explanation offered for a fall. If the fact was already true at the high, it did not cause the fall.
The export rules moved against Chinese memory
On 5 December 2024 the Bureau of Industry and Security placed high bandwidth memory under export control, classifying it as ECCN 3A090.c and extending the Foreign-Produced Direct Product rule to reach HBM made outside the United States. The rule created a specific licence exception with a validity period running to 31 December 2026.
The Department of Defense also lists CXMT’s parent on its 1260H register of Chinese military-civil fusion companies. That listing is not an export ban and we said so in the earlier article, but it shapes who will contract with the company.
HBM is where the memory profit now sits. A control regime aimed at Chinese access to it is a headwind for CXMT and not for the incumbents, which is the opposite of the direction the July selling implied.
The selling has a mechanism, and it is margin
The Financial Supervisory Service published figures on 7 July. Margin loan balances went from 27.3 trillion won at the end of 2025 to 32.9 trillion at the end of March 2026, then to 37.3 trillion at the end of June. Average daily forced liquidations from unsettled trades rose more than sevenfold over the same stretch.
Korean margin loan balance
Financial Supervisory Service, three dates
The bars scale to the June figure. Six months, 10 trillion won added. The balance was still at its high point when the July decline began.
The Financial Services Commission went further. Counting margin loans together with single-stock leveraged ETFs and ETNs, it put total leverage at 41 trillion won at the end of 2025 and 74.8 trillion by the first half of 2026, a rise of 82.4 per cent. It named those products as a principal cause of the volatility and moved to cap account-level exposure and cut multipliers.
A regulator rarely names a mechanism this plainly. When a forced seller is liquidating, the price they accept is not a judgement about the business.
What we know and what we do not
This argument has a hole and we would rather show you where it is.
| Claim | Evidence | Grade |
|---|---|---|
| Record quarter at SK hynix | Company release | Primary |
| Margin debt at 37.3tn won | FSS, 7 July 2026 | Primary |
| Forced selling up sevenfold | FSS, 7 July 2026 | Primary |
| Total leverage at 74.8tn won | FSC release | Primary |
| HBM under export control | Federal Register | Primary |
| KOSPI down about 22% in July | Foreign press only | Reported |
| These two names are a third of margin debt | Not confirmed | Dropped |
The last row is the hole. We can show the Korean market was carrying record leverage and that liquidations spiked. We cannot show how much of that landed on these two shares specifically, because the regulator publishes the market total and not a breakdown by ticker. A figure putting the pair at a third of all margin debt circulated in the press and we could not trace it to the FSS or the exchange, so it is not in this article. Without it, the mechanism explains the market and our extension of it to two constituents is inference.
The index levels have the same problem in weaker form. The Korea Exchange data portal is the primary record and we could not query it, so the July decline is here as reported by foreign press rather than recomputed from closing prices. We are not building on the exact percentage.
What breaks this
The Federal Register revoked Validated End User authorisations for Intel’s Dalian site, Samsung China Semiconductor and SK hynix Semiconductor China, published 2 September 2025 and effective 31 December 2025. Those two Korean fabs had operated since 2023 under broad authorisation covering everything short of EUV. They now need licences.
This is the one piece of confirmed damage to the Korean makers in the whole file, and it cuts against the case we are making. We put it in the opinion section as well, because a reader who only reads the top should still meet it.
Then the cycle. Memory is cyclical and record margins have marked tops before. If the 76 per cent is a pricing artefact, as the industry-wide figure suggests, then the earnings that make this drawdown look unjustified are themselves the peak-cycle number. And the leverage is still there: 37.3 trillion won at the end of June is not a cleared position.
None of that is priced by us, because we do not publish price targets.
What we take from this
Three explanations were offered for the fall. The CXMT gap was already the same width at the June high. The export rules point at Chinese memory, not Korean. Only the margin data moved, and the regulator says so in its own words.
That is the argument, and its limit is the row marked Dropped in the table above. If you want to act on it, the mechanics of actually holding these shares from outside Korea are covered in how foreign investors buy Korean stocks, and the reason Samsung Electronics cannot be bought as a US-listed share is in the SSNLF article.
Sources
We take facts from these and write our own sentences. Where a figure originates in a company filing we say so, and where it originates in a research house estimate we name the house. We link to a document only where we hold the exact address for it; a link to a publisher’s front page would not get you to the source, so where we do not have the direct address we give you enough to find it.
Filings and official documents
- SK hynix Newsroom, Q2 2026 Business Results. Revenue, operating profit and net profit for the quarter, and the year-on-year comparisons.
- Federal Register, Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items, document 2024-28270, 5 December 2024. The HBM control, ECCN 3A090.c and the licence exception.
- Federal Register, Revocation of Validated End User Authorizations in the People’s Republic of China, document 2025-16735, 2 September 2025, effective 31 December 2025. Covers Intel Semiconductor Dalian, Samsung China Semiconductor and SK hynix Semiconductor China.
- Financial Services Commission, joint measures on single-stock leveraged ETFs and ETNs. Total leverage of 41 trillion won at end-2025 against 74.8 trillion in the first half of 2026, and the proposed caps.
- Financial Supervisory Service, press release of 7 July 2026 on consumer risk from debt-funded investment. Margin loan balances at three dates and the rise in forced liquidations. Cited without a link: we hold the address of the press-release index rather than of this document, and an index page would not get you to the figures.
Research houses and reporting
- Counterpoint Research, estimates of second-quarter 2026 operating margins across Samsung, SK hynix and Micron, in the range of 75 to 80 per cent with Micron near 81. An estimate, and marked as one in the body.
- Bloomberg, Fortune and Al Jazeera for the scale of the July decline in the KOSPI. Reported figures. The Korea Exchange information data system is the primary record and we could not query it, so we have not recomputed them.
- The CXMT process and HBM comparisons are carried in our earlier article, which lists its own eleven sources. We link to it rather than restating them.
Corrections
None yet. If you can point to a primary document that contradicts anything above, we will correct it and say what changed.
Disclosure. The author holds no position in Samsung Electronics or SK hynix as of 4 August 2026. This article is general information and analysis about the Korean memory sector. It is not investment advice, not a recommendation to buy or sell any security, and not a forecast of any price or index level. The headline poses a buying case and the section headed Editor’s opinion argues one: that is a general argument about a market, and we fence it off from the sourced material for that reason. We have not tailored anything here to your circumstances, we do not know your horizon or what a further forty per cent decline would do to you, and only a qualified adviser in your jurisdiction can weigh that. We are not registered as an investment adviser in any jurisdiction, and this site has no commercial relationship with any company, exchange or research provider named above. See the Editorial & Sourcing Policy and Disclaimer.