Samsung Electronics operating profit jumps 932.8% in first quarter, beating expectations

Samsung Electronics said Tuesday its first-quarter operating profit jumped 932.8% as memory chip prices rebounded on AI optimism.

Here are Samsung’s first quarter results compared to LSEG estimates:

• Income: 71.92 trillion Korean won (about $52.3 billion), up from 71.04 trillion Korean won
• Operating income : 6.61 trillion Korean won, compared to 5.94 trillion Korean won

Samsung’s revenue for the quarter ending in March jumped 12.81% from a year ago, while operating profit soared 932.8% during the same period.

The figures were in line with the company’s forecast earlier this month, where Samsung said its operating profit for the January-March quarter was likely to reach 6.6 trillion Korean won, up 931% from compared to last year. The company expects revenue of 71 trillion won for the first quarter.

The South Korean electronics giant posted record losses in 2023 as the industry recovered from a post-Covid drop in demand.

“The company recorded consolidated revenue of KRW 71.92 trillion driven by strong sales of flagship Galaxy S24 smartphones and rising prices of memory semiconductors. Operating profit increased to KRW 6.61 trillion as the memory business returned to profit by meeting demand for high value-added products. products,” Samsung Electronics said in a statement Tuesday.

Samsung is the world’s largest maker of dynamic random access memory (DRAM) chips, commonly found in a wide range of consumer devices, including smartphones and computers.

“We assume that the earnings surprise is due to the higher rise in memory prices amid an AI-driven strong recovery cycle. We expect the company to steer toward a positive memory market outlook and highlight its readiness for the AI ​​era, including HBM (12H HBM3E, HBM4) and foundry/packaging solution,” said SK Kim of Daiwa Capital Markets in emailed comments to CNBC on Monday, ahead of the earnings release.

As AI models become more complex and data sets become larger, these models need memory chips with higher capacities and faster speeds to meet these workloads.

Kim said in an April 5 report that he expects a further rise in memory chip prices to boost Samsung’s second-quarter profits, following the AI ​​boom and Taiwan earthquake .

“In particular, we expect further price increases resulting from the Taiwan earthquake,” Kim said, adding that the earthquake in early April temporarily affected TSMC‘sand Micronthe production.

Citi analysts said they see upside for Samsung’s NAND flash memory business due to demand for AI computing. In an April 5 note, they reiterated their “buy” rating on the company with a price target of 120,000 won, a 56% upside from Monday’s closing price of 76,700 won.

NAND is another basic memory chip alongside DRAM.

“We expect storage (HDD) to be the next bottleneck in AI computing, especially in AI training, and we expect Samsung Electronics to be one of the biggest beneficiaries of the SSD demand dynamics for AI training,” Citi analysts said.

Many countries around the world are racing to manufacture advanced semiconductors.

Earlier this month, the Biden administration agreed to provide Samsung with up to $6.4 billion in funding to create new chip production capacity in Texas. Micron and TSMC are also set to receive grants to boost U.S. chip manufacturing after decades of shifting chip production to Asia.

Samsung and TSMC are expected to face competition from Japan’s Rapidus Corporation, which recently received $3.89 billion in additional subsidies from the Japanese government to mass produce 2-nanometer chips starting in 2027.

There are growing concerns that Samsung Electronics risks losing its leadership position to rivals like SK Hynix, the world number one. 2 memory chip manufacturers.

SK Hynix said on March 19 that it had become the first in the industry to mass produce HBM3E, the new generation of high-bandwidth memory chips used in AI chipsets. SK Hynix is ​​the main supplier of HBM3 chips for Nvidia’s AI chipsets.

Mehdi Hosseini, senior technology hardware analyst at Susquehanna International Group, noted in early April that Samsung was once the market leader in memory, smartphone and display innovations.

Now, Samsung is only “benefiting from the resumption of the cycle,” he added.

In the first quarter, Samsung managed to regain the top spot in smartphone shipments after losing the crown to Apple in 2023, according to International Data Corp.