Samsung Electronics Co. has reported its highest net income growth since 2010, driven by a six-fold increase in earnings to 9.64 trillion won ($6.96 billion) for the June quarter. This performance exceeded analysts’ expectations of 7.97 trillion won. The company also posted a 15-fold surge in preliminary operating profit and a 23% increase in revenue, marking the largest sales gain since 2021.
The significant revenue growth is largely attributed to Samsung’s semiconductor division, which earned 6.45 trillion won in operating profit. This boost is due to rising memory prices and strong demand for high-bandwidth memory (HBM) chips, essential for powering AI technologies. Sales of these chips increased by more than 50% from the previous quarter.
Samsung has revealed plans to double its HBM production next year, with a focus on ramping up output of its latest HBM3E chips. This product is expected to represent 60% of all HBM sales by the fourth quarter. Despite past challenges, including delays in chip certification by Nvidia Corp., Samsung has recently received approval for its HBM3 chips and anticipates approval for HBM3E within two to four months.
“Samsung’s memory business has made a full recovery and is back on track,” said Tom Kang, Director at Counterpoint Research. He attributed the surprising profit to high demand for server-related products and noted that the Galaxy S24’s strong performance contributed to increased sales of camera sensors, chips, and displays.
Samsung’s financial strength is underscored by its cash reserves of over 100 trillion won, with plans to actively respond to growing demand. Research and development expenses rose 11% to a new high of 8 trillion won in the June quarter.
Shares of Samsung increased by about 1% in Seoul, while SK Hynix’s stock remained relatively unchanged. The results suggest a rebound in the global computing market, bolstered by increased spending on AI development. Both DRAM and NAND prices rose during the quarter, benefiting Samsung’s foundry business, which is expected to see growth in the second half of the year due to rising demand for AI and high-performance computing.
Despite Samsung’s advancements, SK Hynix remains a leader in high-capacity memory critical for AI services, with its HBM production capacity nearly fully booked through 2025. This has led to a more than 150% increase in SK Hynix shares since the start of 2023, significantly outperforming Samsung.
Samsung’s shift towards increasing HBM and server memory production may constrain the supply of cutting-edge products for PCs and mobile devices. Operating profit in Samsung’s mobile and network business declined by 0.8% due to higher component prices affecting margins. The overall smartphone market is expected to grow, driven by premium AI demand, while lower-tier demand may slow, according to Daniel Araujo, Vice President of the Mobile Division.
The company is also facing labor unrest, with its largest union organizing strikes and rallies at its chipmaking facilities. However, these demonstrations have not caused production delays.
Bloomberg Intelligence notes that Samsung’s semiconductor operating profit margin could improve further due to favorable pricing, though rival SK Hynix may maintain a lead in high-bandwidth memory chips for AI, with a 33% operating margin in the second quarter.
