Samsung Electronics has reported a remarkable 15-fold increase in its second-quarter operating profit, driven by a surge in semiconductor prices fueled by the booming artificial intelligence (AI) market. The company’s operating profit rose to 10.4 trillion won ($7.54 billion) from 670 billion won a year earlier.
Key Takeaways
- 15-Fold Profit Increase: Samsung’s operating profit surged to 10.4 trillion won ($7.54 billion) in Q2 2024, up from 670 billion won a year earlier.
- AI-Driven Demand: The rise in profit is largely attributed to increased demand for high-end DRAM and NAND Flash memory chips used in AI applications.
- Revenue Growth: Revenue for the quarter increased by 23% to 74 trillion won.
- Stock Market Reaction: Samsung shares rose by 1.2% following the announcement.
- Future Outlook: Analysts are keenly watching Samsung’s outlook on legacy chips and the potential approval of its fourth-generation HBM chips by Nvidia.
AI Demand Boosts Chip Prices
Samsung’s semiconductor division posted its second consecutive quarterly profit, thanks to the rising prices of memory chips. The demand for high-end DRAM chips, such as high bandwidth memory (HBM) chips used in AI chipsets, has been particularly strong. This surge in demand has led to a significant increase in chip prices.
During the second quarter, memory chip prices jumped by about 13% to 18% for DRAM chips and 15% to 20% for NAND Flash chips, according to data provider TrendForce. However, the climb in memory chip prices may slow in the third quarter, with TrendForce forecasting a 5% to 10% price hike for both conventional DRAM and NAND Flash chips.
Financial Performance
Samsung’s revenue for the second quarter rose by 23% from the same period a year earlier, reaching 74 trillion won. The company’s profit beat the 8.8 trillion won LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate. This quarter was Samsung’s most profitable since the third quarter of 2022.
In addition to higher chip prices, the better-than-expected profit likely reflected Samsung reversing its previous inventory writedowns, as the value of its chip inventory has rebounded in accounting terms.
Market Reaction and Future Outlook
Samsung shares opened up 1.2% after the guidance, compared to a 0.4% rise in the wider market. Analysts are particularly interested in Samsung’s outlook on legacy chips, which will be a sign of whether this chip industry recovery can last into next year.
AI-driven demand for high-end chips such as HBM and solid-state drives (SSDs) is expected to outperform the rest of the market. However, Samsung has been lagging behind its South Korean rival SK Hynix in the supply of high-end HBM chips to customers like Nvidia.
Investors are also awaiting news on whether Samsung’s latest fourth-generation HBM chips will receive approval to supply Nvidia after they failed earlier tests due to heat and power consumption problems. Samsung recently replaced the chief of its semiconductor division in a bid to overcome what it called a “chip crisis.”
Conclusion
Samsung’s impressive second-quarter performance highlights the significant impact of AI-driven demand on the semiconductor market. While the company faces challenges in the supply of high-end chips, its strong financial results and strategic changes indicate a positive outlook for the future.