Samsung Q2 profit increase AI

Samsung Electronics Reports 15-Fold Increase in Q2 Operating Profit Amid AI Boom

Samsung Electronics Projects Over 15-Fold Increase in Q2 Operating Profit

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – Samsung Electronics announced a projected surge of over 15 times in its second-quarter operating profit, driven by a rebound in semiconductor prices amid the artificial intelligence boom.

The world’s largest producer of memory chips, smartphones, and TVs estimated its operating profit to be 10.4 trillion won ($7.54 billion) for the quarter ending June 30, a significant increase from 670 billion won a year ago.

The profit surpassed the 8.8 trillion won forecast by LSEG SmartEstimate, which is based on the most accurate analyst predictions. This quarter marks Samsung’s most profitable since Q3 2022.

Key Factors Behind the Profit Surge

Alongside higher chip prices, analysts suggest that Samsung’s better-than-expected profit may also be due to reversing previous inventory writedowns, reflecting the rebounded value of its chip inventory.

Samsung reported an estimated revenue increase of 23% year-on-year, reaching 74 trillion won in the second quarter.

Following the guidance, Samsung shares opened 1.2% higher, compared to a 0.4% rise in the broader market. Detailed second-quarter earnings are expected to be released on July 31.Samsung Q2 profit increase AI

AI Demand Boosts Semiconductor Division

Samsung’s semiconductor division likely posted its second consecutive quarterly profit, improving from the first quarter, as memory chip prices recovered from the mid-2022 to end-2023 trough caused by weak post-pandemic gadget demand.

Explosive demand for high-end DRAM chips, such as high-bandwidth memory (HBM) chips used in AI chipsets, and chips for data center servers and AI-driven gadgets, have driven up chip prices, analysts reported.

During Q2, memory chip prices increased by approximately 13% to 18% for DRAM chips and 15% to 20% for NAND Flash chips used in data storage, according to TrendForce.Samsung Q2 profit increase AI

However, TrendForce forecasts a slower climb in memory chip prices for Q3, predicting a 5% to 10% price hike for both conventional DRAM and NAND Flash chips, as demand for older consumer electronics chips remains weak.

“We’re keen to hear Samsung’s outlook on legacy chips during the upcoming earnings call, as it will indicate whether the chip industry recovery can sustain into next year,” said Ko Yeongmin, an analyst at Daol Investment & Securities.

AI-driven demand for high-end chips like HBM and solid-state drives (SSDs) is expected to outperform the rest of the market. However, Samsung has lagged behind South Korean rival SK Hynix in supplying high-end HBM chips to customers such as Nvidia (NASDAQ).

U.S. competitor Micron Technology (NASDAQ) exceeded revenue estimates last quarter, driven by AI industry demand, though its current-quarter forecast fell short of investor expectations.

Investors await news on whether Samsung’s latest fourth-generation HBM chips will pass approval to supply Nvidia after previous tests failed due to heat and power consumption issues, sources said.

In May, Samsung replaced its semiconductor division chief to address what it termed a “chip crisis”. As of Thursday, Samsung shares were up 8% year-to-date, compared to SK Hynix’s 63% rise.

($1 = 1,379.8700 won)

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