Samsung Electronics reported a staggering 932.8% increase in operating profit for the first quarter of the year, largely driven by the resurgence of memory chip prices linked to the growing optimism around Artificial Intelligence (AI) technologies. The company’s revenue stood at 71.92 trillion Korean won (approximately $52.3 billion), outperforming the estimated 71.04 trillion Korean won. Similarly, the operating profit reached 6.61 trillion Korean won, surpassing the expected 5.94 trillion Korean won.
Samsung’s revenue surged by 12.81% compared to the same period last year and its operating profit skyrocketed by an impressive 932.8%. These numbers aligned closely with the company’s predictions shared earlier in the month, with Samsung anticipating a 931% rise in operating profit to 6.6 trillion Korean won, while projecting first-quarter revenue to hit 71 trillion won. The tech giant attributed its robust financial performance to strong sales of flagship Galaxy S24 smartphones and the spike in memory semiconductor prices.
Samsung Electronics, being the largest manufacturer of dynamic random-access memory chips (DRAM) globally, emphasized its Memory Business‘s return to profitability through addressing the high demand for premium memory products. Industry expert SK Kim from Daiwa Capital Markets highlighted that the company’s earnings surpassed expectations due to an upsurge in memory prices driven by AI-focused market trends. Kim anticipates that Samsung will maintain a positive outlook on the memory market and emphasize its preparedness for the AI era, including advancements in AI-driven memory solutions.
As Artificial Intelligence models become increasingly intricate and datasets grow in scale, the need for memory chips with enhanced capabilities in terms of capacity and speed becomes essential to cater to these evolving workloads. Kim expects further price hikes in memory chips to bolster Samsung’s second-quarter earnings, propelled by the flourishing AI landscape and the recent earthquake in Taiwan, which briefly impacted the production of key players like TSMC and Micron.
The surge in AI computing demand is poised to benefit Samsung’s NAND flash memory business according to Citi analysts, who reiterated a “buy” rating for the firm and set a target price of 120,000 won — reflecting a 56% upside from the closing price on Monday. Furthermore, the analysts foresee Samsung Electronics capitalizing on the momentum in Solid State Drive (SSD) demand for AI training, positioning the company as a significant beneficiary in this realm.
Despite its current market standing, there are concerns looming over Samsung Electronics potentially losing its edge to competitors like SK Hynix, the second-largest memory chip manufacturer globally. SK Hynix recently announced the mass production of HBM3E, the latest generation of High Bandwidth Memory chips essential for AI chipsets, unveiling the intensifying competition in the semiconductor industry.
In light of the shifting landscape, with countries actively investing in advanced semiconductor manufacturing, Samsung and TSMC face growing competition from Japan’s Rapidus Corporation, which secured substantial subsidies to kickstart the mass production of 2-nanometer chips by 2027. The Biden administration’s commitment to granting significant funding to Samsung, Micron, and TSMC for chip production in the U.S. underscores the global drive towards semiconductor innovation and self-sufficiency.
Samsung Electronics’ remarkable performance in the first quarter of 2023 showcases the company’s resilience and adaptability in the dynamic tech industry landscape. By leveraging the surge in memory chip prices fueled by AI trends and advancing its memory solutions, Samsung has set a promising trajectory for future growth. However, with competitive pressures intensifying and emerging players disrupting the market, Samsung must continue to innovate and stay at the forefront of technological advancements to maintain its leading position in the global semiconductor ecosystem.