Samsung Electronics, the world’s leading producer of memory chips, smartphones, and TVs, estimated on Friday a substantial rise in its second-quarter operating profit, spurred by surging semiconductor prices amid the artificial intelligence boom. The company’s operating profit is expected to soar to 10.4 trillion won ($7.54 billion) for the quarter ending June 30, a significant increase from 670 billion won a year ago.
This forecast surpasses the 8.8 trillion won prediction by LSEG SmartEstimate, which prioritizes more reliable analyst forecasts, marking the most profitable quarter for Samsung since Q3 2022. The substantial profit is attributed not only to higher chip prices but also to the reversal of previous inventory writedowns, as the value of Samsung’s chip inventory has appreciated, analysts noted.
Samsung projects a 23% increase in revenue year-on-year, reaching 74 trillion won for the second quarter. Following this guidance, Samsung shares rose by 1.2%, outperforming the wider market’s 0.4% increase.
AI Demand Boosts Semiconductor Division
Samsung’s semiconductor division is likely to post its second consecutive quarterly profit, bolstered by rising memory chip prices. The demand for high-end DRAM chips, particularly high bandwidth memory (HBM) chips used in AI chipsets, as well as chips for data center servers and AI-powered gadgets, has driven this surge.
According to TrendForce, DRAM chip prices increased by 13% to 18% in the second quarter compared to the previous quarter, while NAND Flash chip prices rose by 15% to 20%. However, the pace of memory chip price increases may decelerate in the third quarter, with TrendForce predicting a 5% to 10% rise for both DRAM and NAND Flash chips, as demand for older chips from the consumer electronics market remains weak.
Industry Outlook and Challenges
Analysts will be closely watching Samsung’s upcoming earnings call for insights on the outlook for legacy chips, which could indicate whether the chip industry recovery will extend into next year. AI-driven demand for high-end chips, such as HBM and solid-state drives (SSDs), is expected to outperform the market, although Samsung has lagged behind its South Korean competitor SK Hynix in supplying high-end HBM chips to major clients like Nvidia.
Last week, U.S. memory chipmaker Micron Technology exceeded revenue expectations due to the AI demand surge, though its forecast for the current quarter fell short of investor expectations.
Investors are also anticipating news on whether Samsung’s latest fourth-generation HBM chips will gain approval to supply Nvidia, after initial tests highlighted issues with heat and power consumption. In May, Samsung replaced the head of its semiconductor division to address what it termed a “chip crisis.”
Year-to-date, Samsung shares had increased by 8% as of Thursday, while SK Hynix shares saw a 63% rise. Detailed second-quarter earnings from Samsung are scheduled for release on July 31.
