Samsung Electronics has recently expressed its high confidence in the ongoing demand for artificial intelligence (AI) technologies, forecasting a promising outlook for the latter half of the year. The South Korean tech giant, renowned for its memory chips and cutting-edge devices, revealed a remarkable surge of over tenfold in its first-quarter operating profit.
The surge in Samsung’s financial performance was primarily driven by the increasing demand for memory chips, a trend attributed to the growing AI sector. The company experienced a nearly doubled sales volume of its memory chips in the first quarter, resulting from a significant uptick in prices due to the AI boom.
“Business conditions are expected to remain positive in the second half of 2024, primarily driven by robust demand, particularly in the realm of generative AI,” stated Samsung in an official statement. Despite acknowledging potential fluctuations due to macroeconomic dynamics and geopolitical tensions, the company remains optimistic about sustained growth.
The market response to Samsung’s outlook was immediate, with a 1.6% surge in its shares during morning trading, surpassing the benchmark index’s modest 0.5% uptick.
Samsung’s operational success materialized with its operating profit soaring to 6.6 trillion won ($4.8 billion) in the January-March period, a substantial leap from the preceding year’s 640 billion won. This figure aligns with Samsung’s earlier projection, marking its highest operating profit since the third quarter of 2022. Furthermore, first-quarter revenue climbed by 13% to reach 71.9 trillion won, with memory chip revenue witnessing a staggering 96% surge to 17.49 trillion won.
The memory chip segment, historically a cornerstone of Samsung’s profitability, rebounded impressively, reporting a profit of 1.91 trillion won in the March quarter, a stark contrast to the 4.58 trillion won loss recorded a year earlier. The resurgence of profitability can be attributed to strategic customer investments in anticipation of future price hikes, particularly in NAND flash and DRAM chips.
In the midst of this optimistic scenario, Samsung’s rival SK Hynix also expressed optimism, foreseeing a complete recovery in the memory chip market, driven by AI demand. Concurrently, Samsung announced the commencement of mass production for its latest high bandwidth memory (HBM) chips, the 8-layer HBM3E, tailored for generative AI chipsets. Additionally, plans are underway to initiate production of the 12-layer version during the second quarter, underscoring Samsung’s commitment to harnessing the opportunities presented by the AI revolution.
Despite the impressive performance, Samsung’s mobile devices business faced challenges, with a first-quarter operating profit of 3.51 trillion won, down from 3.94 trillion won a year earlier. Escalating costs, including elevated memory chip prices, exerted pressure on margins, particularly in light of the launch of flagship Galaxy S24 smartphones during the quarter.