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Samsung Electronics’ Galaxy S24 smartphone during a media preview event on Monday, January 15, 2024 in Seoul, South Korea. Samsung, the world’s most prolific smartphone maker, is leaning on artificial intelligence as the key to boosting sales this year.Photographer: SeongJoon Cho/Bloomberg via Getty Images
Cho Sung Joon | Bloomberg | Getty Images
Samsung Electronics on Tuesday announced a 932.8% increase in first-quarter operating profit as memory chip prices recovered on the back of optimism in AI.
Samsung’s first quarter results and LSEG forecasts are as follows:
- Revenue: 71.92 trillion Korean won (approximately $52.3 billion) vs. 71.4 trillion Korean won
- Operating income: 6.61 trillion Korean won vs. 5.94 trillion Korean won
Samsung’s revenue for the quarter ended March increased 12.81% year-on-year, while operating profit surged 932.8% in the same period.
This figure is in line with the company’s guidance released by Samsung earlier this month, which said Samsung’s operating profit for the January-March period is likely to increase to 6.6 trillion Korean won, an increase of 931% year-on-year. announced. The company had expected first-quarter sales to reach 71 trillion won.
South Korean electronics giants posted record losses in 2023 as the industry reeled from weak demand following the coronavirus outbreak.
The company’s consolidated sales were 71.92 trillion won due to strong sales of its flagship smartphone “Galaxy S24” and rising memory semiconductor prices. In response to high value-added demand, the memory business became profitable, and operating profit increased to 6.61 trillion won. products,” Samsung Electronics said. statement on tuesday.
Citi analysts said they expect Samsung’s NAND flash memory business to see upside as a result of demand for AI computing. In an April 5 memo, the company reiterated its “buy” rating with a price target of 120,000 won, an increase of 56% from Monday’s closing price of 76,700 won.
NAND is another major memory chip along with DRAM.
“Storage (HDD) is expected to be the next bottleneck in AI computing, especially AI training, and Samsung Electronics will be one of the key beneficiaries of the momentum in SSD demand in AI training,” Citi analysts said. I predict that will happen.”
Samsung is the world’s largest manufacturer of dynamic random access memory chips (DRAM), which are commonly used in a wide range of consumer devices such as smartphones and computers.
Samsung said it expects the second quarter to be primarily driven by generative AI demand, although mobile demand remains stable. Meanwhile, he expects PC demand to be affected by slower seasonality, which could cause customers to trim inventories ahead of new product launches in the second half of 2024.
Memory business becomes profitable
Samsung reported an operating profit of 1.91 trillion Korean won in the first quarter of its semiconductor business, compared to a loss of 4.58 trillion won in the same period last year and a loss of 2.18 trillion Korean won in the fourth quarter. Announced.
“We believe this unexpected revenue was driven by higher memory prices driven by a strong AI-driven turnaround cycle. HBM4) and foundry/packaging solutions,” SK Kim of Daiwa Capital Markets told CNBC in an emailed comment on Monday ahead of the earnings release.
As AI models become more complex and datasets grow larger, these models require larger and faster memory chips to accommodate these workloads.
Kim said in a report on April 5 that he expects further price increases for memory chips to boost Samsung’s second-quarter profit on the back of the AI boom and the Taiwan earthquake.
“We expect further price increases, especially due to the earthquake in Taiwan,” Kim said, adding that the earthquake in early April had a temporary impact. TSMC‘sand micronproduction.
To meet the demand for AI, Samsung announced in April that it had begun mass production of HBM3E 8H and V9 NAND. The company plans to mass produce HBM3E 12H products and 1B nanometer 32GB DDR5-based 128GB products within the second quarter.
Despite macroeconomic uncertainty and geopolitical tensions, the company expects the operating environment in the second half of this year to be enhanced by generative AI and “remain positive by demand.”
Samsung also said that development of its 3-nanometer and 2-nanometer processes is “progressing well.” Samsung plans to start mass production of 3-nanometer chips in 2022 and 2-nanometer chips in 2025.
galaxy s24 boost
The company said strong sales of Samsung’s latest smartphone series, the Galaxy S24, contributed to boosting sales and operating profit in its mobile business. His AI features in his S24, such as Circle to Search, were popular among customers.
However, the company warned that smartphone demand and shipments may decline in the second quarter due to seasonality.
However, the smartphone market may recover in the second half of this year due to “stability in consumer sentiment, expansion of AI products and services, and economic growth in emerging markets.”
Samsung said it will continue to expand Galaxy AI to existing and new flagship products to drive further growth.
Intensifying competition
Many countries around the world are competing to manufacture advanced semiconductors.
Early this month, The Biden administration has agreed to give Samsung up to $6.4 billion in funding to create new manufacturing capacity to produce chips in Texas. Micron and TSMC are also poised to receive subsidies to boost chip production in the United States after decades of shifting chip production to Asia.
Samsung and TSMC will face competition from Japan’s Rapidus, which recently received an additional $3.89 billion in subsidies from the Japanese government to mass produce 2-nanometer chips starting in 2027. Issued.
There are growing concerns that Samsung Electronics is at risk of losing its top spot to rivals such as world number one SK Hynix. 2 memory chip manufacturers.
SK Hynix announced on March 19th that it will be the first company to do so. The industry plans to mass produce HBM3E, the next generation high-bandwidth memory chip used in AI chipsets. SK Hynix is the main supplier of his HBM3 chips to 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 innovation.
Currently, Samsung is only “benefiting from the cycle recovery,” he added.
In the first quarter, Samsung managed to regain the top spot in terms of smartphone shipments after losing it. apple In 2023, According to International Data Corporation