Samsung Electronics’ operating profit increased 933% in the first quarter, exceeding expectations
Samsung Electronics Company’s Samsung Galaxy S24 smartphone during a media preview event in Seoul, South Korea, on Monday, January 15, 2024. Samsung, the famous smartphone manufacturer world, is relying on artificial intelligence as the key to achieving greater sales this year. Photographer: SeongJoon Cho/Bloomberg via Getty Images
SeongJoon Cho | Bloomberg | beautiful images
Samsung Electronics on Tuesday said first-quarter operating profit rose 932.8% as memory chip prices rebounded on AI optimism.
Here are Samsung’s first quarter results compared to LSEG estimates:
- Revenue: 71.92 trillion Korean won (about 52.3 billion USD), compared to 71.04 trillion Korean won
- Operating profit: 6.61 trillion Korean won, compared to 5.94 trillion Korean won
Samsung’s revenue in the quarter ended March rose 12.81% from a year ago, while operating profit rose 932.8% in the same period.
These figures are in line with the company’s guidance earlier this month, which Samsung reported operating profit in the January-March quarter is likely to rise to 6.6 trillion won, up 931% from a year ago. The company expects first-quarter revenue of 71 trillion won.
The Korean electronics giant saw it record losses in 2023 as the industry reels from falling demand post-Covid.
“The company achieved consolidated revenue of 71.92 trillion KRW thanks to strong sales of its flagship smartphone Galaxy S24 and higher memory semiconductor prices. Operating profit increased to 6.61 trillion KRW trillion KRW as Memory Business Returns to Profit by Addressing Demand for High Value-Added Products,” Samsung Electronics said in a statement. declare on Tuesday.
Citi analysts said they see growth in Samsung’s NAND flash memory business driven by demand for AI computing. In a note on April 5, it reiterated a “buy” rating on the company with a target price of 120,000 won – a 56% increase from the closing price of 76,700 won on Monday.
NAND is another major memory chip along with DRAM.
“We predict (HDD) storage will be the next bottleneck in AI computing, especially in AI training, and predict Samsung Electronics will be one of the The company benefits primarily from SSD demand dynamics for AI training.”
Samsung is the world’s largest manufacturer of dynamic random access memory (DRAM) chips, commonly found in a variety of consumer devices including smartphones and computers.
Samsung said it expects the second quarter to be primarily driven by demand for synthetic AI, while mobile demand remains stable. Meanwhile, it expects PC demand to be impacted by slow seasonality, which could lead to customers having to adjust inventory levels ahead of new product launches in the second half of 2024.
Memory business returns to profitability
Samsung said its semiconductor business posted an operating profit of 1.91 trillion won in the first quarter, compared with a loss of 4.58 trillion won in the same period a year earlier and a loss of 2.18 trillion won. billion won in the fourth quarter.
“We attribute the earnings surprise to higher memory prices during a strong AI-driven growth cycle. We predict the company will guide the memory market outlook positively and emphasize the Their readiness in the AI era includes HBM (12H HBM3E, HBM4) and foundry/packaging solutions,” SK Kim of Daiwa Capital Markets said in emailed comments to CNBC on Monday, before income announcement.
As AI models become more complex and datasets become larger, these models need memory chips with higher capacity and faster speeds to serve these workloads.
Kim said in an April 5 report that he expects another rise in memory chip prices to boost Samsung’s second-quarter earnings thanks to the AI boom and the Taiwan earthquake.
“In particular, we expect prices to go higher due to the Taiwan earthquake,” Mr. Kim said, adding that the quake in early April temporarily affected prices. TSMC‘sand Micronproduction of.
To meet AI demand, Samsung said it started mass production of HBM3E 8H and V9 NAND in April. It plans to mass produce HBM3E 12H products and a 128GB product based on 32GB nanometer DDR5 1b in the second quarter.
Despite macroeconomic uncertainty and geopolitical tensions, the company expects the operating environment to “remain positive with demand” – powered by innovative AI – in the second half of the year.
Samsung also said that the development of the 3-nanometer and 2-nanometer process is “progressing smoothly.” Samsung launched mass production of 3-nanometer chips in 2022 and plans to start mass production of 2-nanometer chips in 2025.
Galaxy S24 Boost
The company said strong sales of Samsung’s latest Galaxy S24 smartphone line helped lift the revenue and operating profit of its mobile business. AI features on S24 such as Circle to Search are popular with customers.
However, the company warned that smartphone demand and shipments may decline in the second quarter because of seasonality.
However, the smartphone market could see a recovery in the second half of the year thanks to “stabilizing consumer sentiment, expansion of AI products and services, and economic growth in emerging markets”.
Samsung said it will continue to expand Galaxy AI to existing and new flagship products to drive further growth.
Competition is increasing
Many countries around the world are racing to produce advanced semiconductors.
In the first day of this month, The Biden administration has agreed to grant Samsung up to $6.4 billion in funding to create new manufacturing capacity to produce chips in Texas. Micron And TSMC is also ready to receive funding to promote chip production in the US after decades of chip production shifting to Asia.
Samsung and TSMC will face competition from Japan’s Rapidus Group. was granted 3.89 billion USD in additional subsidies from the Japanese government to mass produce 2 nanometer chips from 2027.
There are growing concerns that Samsung Electronics is at risk of losing its leading position to rivals such as SK Hynix, the world’s No. 1 company. 2 memory chip manufacturers
SK Hynix on March 19 said it had become the first in the industry mass production HBM3E, the next generation of high bandwidth memory chips used in AI chipsets. SK Hynix is the main HBM3 chip supplier for Nvidia’s AI chipsets.
Mehdi Hosseini, senior technology hardware analyst for Susquehanna International Group, pointed out in early April that Samsung was once the market leader in memory, smartphone and display innovations. image.
He added that now Samsung only “benefits from the cyclical recovery.”
In the first quarter, Samsung regained the top spot in smartphone sales after losing the crown Apple in 2023, According to the International Data Corporation
