Samsung’s Q2 Earnings Skyrocket as AI Demand and Chip Prices Drive Growth
Key Insights:
- Samsung’s Q2 profit jumps 15-fold to $7.52B, fueled by AI-driven chip demand.
- AI server demand boosts Samsung’s chip division, hitting highest profit since 2022.
- Samsung forecasts HBM3E chips to dominate sales by Q4 2024, aiming for Nvidia approval.
Samsung Electronics has reported a more than 15-fold increase in its second-quarter operating profit, largely driven by rebounding semiconductor prices and strong demand for AI-related technology. The tech giant’s profit for April to June soared to 10.4 trillion won ($7.52 billion) from 670 billion won a year earlier, marking its highest operating profit since the third quarter of 2022.
AI Demand Boosts Chip Division
The semiconductor division emerged as a key driver of Samsung’s profitability, posting a 6.45 trillion won profit in the second quarter, the highest since the same period in 2022. This marks the division’s second consecutive quarterly profit.
Explosive demand for high-end DRAM chips, including high bandwidth memory (HBM) used in AI chipsets and data center servers, contributed significantly to this growth. Samsung noted that its HBM revenue rose by approximately 50% from the previous quarter.
“In the second half of 2024, AI servers are expected to take up a larger portion of the (memory) market as major cloud service providers and enterprises expand their AI investments,” Samsung stated.
Market Reaction and Future Projections
Following the earnings announcement, Samsung’s share price rose 0.7% in morning trade, outperforming a 0.3% rise in the benchmark index (.KS11). The company expects the trend to continue, forecasting that HBM3E chips will account for 60% of its HBM sales by the fourth quarter of 2024. Analysts suggest this target is achievable if Samsung’s HBM3E gains final approval from Nvidia by the third quarter.
Despite these optimistic projections, the company faces challenges. Production capacity will be focused on HBM, server DRAMs, and server solid-state drives (SSDs) for AI applications, which could constrain the supply of PC and mobile memory chips in the latter half of the year.
Smartphone and Mobile Device Segment
While the chip division thrived, Samsung’s mobile devices business experienced a decline in operating profit. The segment’s profit dropped by about 810 billion won from a year earlier due to higher parts costs, despite steady shipments of 54 million smartphones.
Samsung remains optimistic about the future of its mobile business. The company anticipates increased demand for premium smartphones with AI functions and related accessories, such as smartwatches, in the second half of 2024.
Earlier this month, Samsung launched its latest AI-enabled flagship foldable phones and mobile accessories to compete with Apple in the premium smartphone market, including a new health-monitoring ring.
Samsung’s South Korean rival, SK Hynix, also reported strong demand for AI chips, posting its highest quarterly profit since 2018. Both companies benefit from the surge in AI-driven demand for memory chips, which is expected to continue growing as more enterprises and cloud service providers invest in AI technologies.
Revenue and Market Dynamics
Second-quarter revenue for Samsung rose by 23% to 74 trillion won, reflecting robust sales across its various divisions. The company attributes this growth to the rebound in semiconductor prices and the expanding market for AI applications. The recovery in semiconductor prices, spurred by the AI boom, has lifted earnings from a low base a year ago, when post-pandemic demand for gadgets weakened.
Samsung’s projection for the remainder of 2024 includes a continued focus on high-demand areas such as AI servers and related memory solutions, with an anticipated increase in overall smartphone demand driven by premium products with AI capabilities.
Editorial credit: Sybillla / Shutterstock.com
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