By Joyce Lee and Heekyong Yang July 4, 2024, 9:33 PM PDT (Updated 2 days ago)
SEOUL, July 5 (Reuters) – Samsung Electronics (005930.KS) estimated on Friday a more than 15-fold rise in its second-quarter operating profit, buoyed by soaring semiconductor prices driven by the artificial intelligence (AI) boom, which significantly boosted earnings from a year ago.
The world’s largest memory chip, smartphone, and TV maker projected its operating profit to soar to 10.4 trillion won ($7.54 billion) for the quarter ended June 30, up from 670 billion won a year earlier. This figure surpassed the 8.8 trillion won LSEG SmartEstimate, which aggregates forecasts from consistently accurate analysts, marking Samsung’s most profitable quarter since Q3 2022.
Analysts attributed the better-than-expected profit to both higher chip prices and Samsung’s reversal of previous inventory writedowns, as the value of its chip inventory rebounded on accounting terms. Revenue for the quarter likely rose 23% year-on-year to 74 trillion won, according to Samsung’s estimates.
Following the profit guidance, Samsung shares opened up 1.2%, outperforming the wider market’s 0.4% rise (.KS11). Detailed second-quarter earnings are set for release on July 31.
AI Demand Boost
Samsung’s semiconductor division is anticipated to report its second consecutive quarterly profit, building on improvements seen in Q1. The demand surge for high-end DRAM chips, including high bandwidth memory (HBM) chips used in AI chipsets, along with chips for data center servers and AI-powered gadgets, has driven up chip prices.
During the second quarter, prices for DRAM chips used in tech devices increased by about 13% to 18% compared to the previous quarter, while NAND Flash chips for data storage rose by 15% to 20%, as reported by data provider TrendForce.
Looking ahead, TrendForce forecasts a moderated price hike of 5% to 10% for both DRAM and NAND Flash chips in the third quarter, with subdued demand expected for older legacy chips in the consumer electronics market.
“At the earnings call, we will be keen on Samsung’s outlook for legacy chips, a critical indicator for the sustainability of the chip industry recovery into next year,” noted Ko Yeongmin, an analyst at Daol Investment & Securities.
AI-driven demand is expected to continue supporting high-end chip segments like HBM and solid-state drives (SSDs), with analysts noting Samsung’s competitive position relative to South Korean rival SK Hynix (000660.KS) in supplying high-end HBM chips to major customers such as Nvidia (NVDA.O).
U.S.-based Micron Technology (MU.O) recently reported better-than-expected quarterly revenue driven by AI industry demand, though its current-quarter forecast fell short of investor expectations.
Investors are also awaiting updates on Samsung’s fourth-generation HBM chip approval for Nvidia, following earlier test setbacks related to heat and power consumption issues, sources revealed.
In May, Samsung replaced the chief of its semiconductor division amidst what it described as a “chip crisis.” As of Thursday, Samsung’s shares were up 8% year-to-date, compared to SK Hynix’s 63% increase.
($1 = 1,379.8700 won)
