Samsung Electronics’ operating profit jumps 933% in first quarter, beats expectations

Samsung
Electronics
on
Tuesday
said
operating
profit
for
the
first
quarter
jumped
932.8%
as
memory
chip
prices
rebounded
on
the
back
of
AI
optimism.

Here
are
Samsung’s
first-quarter
results
versus
LSEG
estimates:

• 
  Revenue: 71.92
  trillion Korean
  won
  (about
  $52.3
  billion),
  vs.
  71.04
  trillion
  Korean
  won
• 
  Operating
  profit: 6.61
  trillion
  Korean
  won,
  vs. 5.94
  trillion
  Korean
  won

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

The
figures
were
in
line
with
the
company’s
guidance
earlier
this
month,
where

Samsung
said
operating
profit
in
the
January-March
quarter
likely
rose
to
6.6
trillion
Korean
won,
up
931%
from
a
year
ago.
The
firm
expected
first
quarter
revenue
at
71
trillion
won.

The
South
Korean
electronics
giant
saw

record
losses
in
2023
as
the
industry
reeled
from
a
post-Covid
slump
in
demand.

“The
company
posted
KRW
71.92
trillion
in
consolidated
revenue
on
the
back
of
strong
sales
of
flagship
Galaxy
S24
smartphones
and
higher
prices
for
memory
semiconductors.
Operating
profit
increased
to
KRW
6.61
trillion
as
the
Memory
Business
returned
to
profit
by
addressing
demand
for
high
value-added
products,”
Samsung
Electronics
said
in
a

statement
on
Tuesday.

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

NAND
is
another
staple
memory
chip
alongside
DRAM.

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

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

Samsung
said
it
expects
the
second
quarter
to
be
driven
mostly
by
demand
for
generative
AI,
while
mobile
demand
remains
stable.
Meanwhile,
it
expects
PC
demand
to
be
impacted
by
slow
seasonality,
which
could
lead
to
customers
adjusting
inventories
before
new
product
launches
in
the
second
half
of
2024.

In
a
Tuesday
earnings
call,
the
firm
warned
of
escalating
geopolitical
instability
and
continued
cost
hikes
in
major
components,
particularly
memory.

“Profitability
in
Q2
is
expected
to
be
down
slightly
compared
to
Q1
and
Q3,
which
is
when
we
released
new
flagship
products
this
year.
In
response,
we’re
focusing
on
cost
competitiveness
throughout
the
R&D,
manufacturing
and
sales
processes
to
achieve
solid
profitability,”
said
Samsung,
adding
that
it
will
continue
to
boost
flagship
sales
through
expansion
of
Galaxy
AI.

Samsung
said
its
semiconductor
business
logged
a
1.91
trillion
Korean
won
in
operating
profit
in
the
first
quarter,
as
compared
to
a
loss
of
4.58
trillion
won
in
the
same
period
a
year
ago
and
a
loss
of
2.18
trillion
Korean
won
in
the
fourth
quarter.

“We
assume
the
earnings
surprise
was
driven
by
higher
memory
price
hike
on
AI-driven
strong
upturn
cycle.
We
anticipate
the
company
will
guide
for
positive
memory
market
outlook
and
emphasize
its
readiness
in
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
datasets
become
larger,
these
models
need
memory
chips
with
higher
capacities
and
faster
speeds
to
cater
to
these
workloads.

Kim
said
in
an
April
5
report
he
expects
another
price
hike
on
memory
chips
to
drive
Samsung’s
second-quarter
earnings
on
the
back
of
an
AI
boom
and
the
earthquake
in
Taiwan.

“Especially,
we
expect
more
upside
in
prices
resulting
from
the
earthquake
in
Taiwan,”
said
Kim,
adding
that
the
earthquake
in
early
April
temporarily
impacted


TSMC‘s
and


Micron‘s
production.

To
meet
AI
demand,
Samsung
said
it
started
mass
producing
HBM3E
8H
and
V9
NAND
in
April.
It
plans
to
mass
produce
HBM3E
12H
products
and
a
128GB
product
based
on
1b
nanometer
32GB
DDR5
within
the
second
quarter.

Despite
macroeconomic
uncertainty
and
geopolitical
tensions,
the
firm
expects
the
operational
environment
to
“remain
positive
with
demand”
–
bolstered
by
generative
AI
–
in
the
second
half
of
the
year.

Samsung
also
said
development
of
3-nanometer
and
2-nanometer
processes
is
“progressing
smoothly.”
Samsung
kicked
off
mass
production
of
3-nanometer
chips
in
2022
and
plans
to
start
mass
producing
2-nanometer
chips
in
2025.

Strong
sales
of
Samsung’s
latest
smartphone
series
Galaxy
S24
helped
to
lift
revenue
and
operating
profit
of
the
mobile
business,
the
firm
said.
AI
features
on
the
S24
such
as
Circle
to
Search,
Photo
Assist
and
Live
Translate
were
popular
among
customers,
Samsung
said.

However,
the
firm
warned
that
smartphone
demand
and
shipments
could
decline
in
the
second
quarter
because
of
seasonality.

But
the
smartphone
market
could
see
a
rebound
in
the
second
half
of
the
year
from
“stabilizing
consumer
sentiment,
the
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.

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

Earlier
this
month,

the
Biden
administration
agreed
to
grant
Samsung
up
to
$6.4
billion
of
funding
to
create
new
manufacturing
capacity
to
produce
chips
in
Texas.

Micron
and

TSMC
are
also
poised
to
receive
grants
to
boost
chipmaking
in
the
U.S.
after
decades
of
chip
production
moving
to
Asia.

Samsung
and
TSMC
are
set
to
face
competition
from
Japan’s
Rapidus
Corporation,
which
was
recently

granted
$3.89
billion
in
additional
subsidies
from
the
Japanese
government
to
mass
produce
2-nanometer
chips
from
2027.

There
are
rising
concerns
that
Samsung
Electronics
risks
losing
its
leading
position
to
rivals
like
SK
Hynix,
the
world’s
no.
2
memory
chip
maker.

SK
Hynix
on
March
19
said
it
became
the
first
in
the
industry
to
mass
produce
HBM3E,
the
next-generation
of
high
bandwidth
memory
chips
used
in
AI
chipsets.
SK
Hynix
is
the
primary
supplier
of
HBM3
chips
to
Nvidia’s
AI
chipsets.

Mehdi
Hosseini,
senior
tech
hardware
analyst
of
Susquehanna
International
Group,
pointed
out
in
early
April
that
Samsung
used
to
be
the
market
leader
in
memory,
smartphones
and
display
innovations.

Now,
Samsung
is
only
“benefiting
from
the
cycle
recovery,”
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.