Samsung sees 10 times greater profit with demand for chips – 04/05/2024 – Tech

Samsung expects to post a 10-fold jump in first-quarter operating profit as memory chip prices stage a strong recovery following the industry’s worst crisis in decades last year.

The world’s largest memory chip maker in terms of sales estimated this Friday (5) that operating profit increased 931% to 6.6 trillion won ($4.9 billion), in preliminary figures for the first three months of this year.

That was better than analysts’ expectations of 5.7 trillion won, according to LSEG SmartEstimates. Sales rose 11.4% to 71 trillion won from a year earlier.

The upbeat estimates mark Samsung’s biggest earnings since the third quarter of 2022, as its chip division is likely to post its first profit in five quarters.

Samsung shares were trading down 0.7% on Friday morning after rising about 30% over the past year. Detailed results will be announced at the end of the month.

Production cuts by major manufacturers and strong demand for high-performance chips amid an artificial intelligence boom have boosted memory model prices.

Prices for DRAM memory chips rose about 20% in the first quarter, while flash memory chips, used for data storage, gained 23% to 28%, according to data provider TrendForce.

Analysts predict Samsung’s chip division will post an operating profit of about 900 billion won in the first quarter, compared with an operating loss of 2.2 trillion won in the December quarter.

“We are seeing a stronger than expected recovery in the memory market, with a larger than expected increase in prices,” said Roko Kim, analyst at Hana Financial Investment. “It will be a year of maximum gains as Nand chip prices rise.”

The recovery of the $160 billion memory chip market was highlighted by Micron’s strong sales forecast last month, with the US chipmaker forecasting record sales in 2025.

Samsung shares were also boosted by easing concerns about its competitiveness in high-bandwidth memory (HBM), after Nvidia chief Jensen Huang said last month that his company was in the process of qualifying the new chips. Samsung’s HBM for its graphics processing units.

Samsung is struggling to catch up to competitors in more profitable AI chips, as it has lagged domestic rival SK Hynix in mass production of more advanced HBM models.

Kyung Kye-hyun, the company’s CEO in charge of the chip business, said last month that Samsung was close to claiming leadership in HBM chips.

He also told a shareholder meeting that the company expected more than $100 million in revenue from its advanced chip packaging business this year.

“Samsung is making progress in the HBM business, which has been seen as its Achilles heel,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.

Lee added that Samsung’s loss-making chip foundry business was still weighing on the company’s earnings, but he expected the contract manufacturing division to become profitable in the second half of this year.

Samsung, which is building a foundry in Texas, is expected to receive at least $5 billion in U.S. subsidies, while domestic rival SK Hynix is ​​investing about $4 billion in an advanced AI chip packaging plant in Indiana .

Samsung’s strong earnings were also driven by robust sales of its latest AI-powered smartphones. The company in January launched its Galaxy S24 Android phones capable of running “on-device” generative artificial intelligence capabilities, helping Samsung regain the top spot in global smartphone sales in February.