Samsung flags 15-fold surge in Q2 profit as AI boom lifts chip prices

July 5, 2024

Samsung Electronics Co. on Friday estimated its second-quarter operating profit shot up more than 15-fold, as a prolonged boom in artificial intelligence computing lifted prices of memory chips.

The world’s biggest maker of memory chips expected a second-quarter operating profit of 10.4 trillion won (US$7.5 billion), up 1,452.2 percent from a year earlier, Samsung Electronics said in a regulatory filing.

Revenue increased 23.3 percent to 74 trillion won for the April-June period. The company did not disclose the data for net earnings in the guidance.

The operating profit was 25.8 percent higher than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

It is the first time that Samsung Electronics posted an operating profit of 10 trillion won or over since the third quarter of 2022, when it logged 10.8 trillion won.

The second-quarter operating profit also topped its annual figure of 6.5 trillion won for 2023.

In particular, high bandwidth memory (HBM), a high-performance DRAM, saw increased demand, especially for Nvidia’s graphics processing units (GPUs), which are essential for AI computing.

According to TrendForce, a Taiwanese market research firm, DRAM and NAND flash memory prices rose by 18 percent and 20 percent, respectively, in the second quarter.

Samsung Electronics did not disclose a detailed earnings report of its business divisions, but the market forecast that the company’s semiconductor business earned around 5 trillion won in operating profit.

The company’s mainstream semiconductor business posted an operating profit of 1.9 trillion won for the first quarter, marking the first quarterly profit since the fourth quarter of 2022.

The device division, which includes smartphones and laptops, is expected to report an operating profit of 2.3 trillion won for the April-June period.

The display and home appliances divisions are each estimated to contribute about 700 billion won in operating profit.

Analysts predict continued growth in Samsung’s operating profit in the second half of the year, driven by sustained demand for HBM products and higher-capacity solid-state drives.

The company’s operating profit for the third quarter is expected to jump nearly 400 percent to 12 trillion won, with sales reaching 82.5 trillion won.

A key factor for ongoing improvement will be the mass production of the fifth-generation HBM3E chip, which is currently undergoing quality tests by Nvidia.

Samsung recently established a new HBM development team to focus on HBM research and development, demonstrating its commitment to regaining leadership in the AI semiconductor market, currently led by SK hynix.

“Increasing demand for high-capacity memory will continue as AI server infrastructure investment booms,” said Lee Min-hee, a researcher at BNK Investment & Securities. “The key will be when Samsung Electronics can increase sales of HBM3E and 128GB high-capacity DRAM, and whether it can secure orders for AI chips, which are currently monopolized by TSMC.”

The company will release its final earnings report later this month.