Samsung Electronics recently reported an impressive 932.8% jump in operating profit for the first quarter, driven by the rebound of memory chip prices amidst the optimism surrounding Artificial Intelligence (AI). The company’s revenue stood at 71.92 trillion Korean won, exceeding LSEG estimates by 0.88 trillion Korean won. The operating profit reached 6.61 trillion Korean won, surpassing the estimated 5.94 trillion Korean won. These figures confirm a significant growth trajectory for Samsung in the first quarter as their revenue spiked by 12.81% compared to the same period last year, while the operating profit skyrocketed by 932.8%.
Being the largest manufacturer of dynamic random-access memory chips (DRAM) globally, Samsung has benefited immensely from the increasing demand for memory semiconductors in various consumer devices like smartphones and computers. The company attributes its revenue boost to the robust sales of flagship Galaxy S24 smartphones and the surge in memory semiconductor prices. Additionally, Samsung’s Memory Business returned to profit by catering to the escalated demand for high value-added products.
Analysts like SK Kim from Daiwa Capital Markets have attributed Samsung’s earnings surprise to the sharp memory price hike induced by the strong upturn cycle of AI. As AI models become more complicated and datasets continue to expand, the need for memory chips with higher capacities and faster speeds has escalated. This evolving trend has positioned Samsung to leverage its readiness in the AI era, especially with memory products such as HBM (12H HBM3E, HBM4) and foundry/packaging solutions. Kim anticipates another price hike on memory chips in the second quarter, driven by the AI boom and external factors like the recent earthquake in Taiwan which temporarily impacted TSMC’s and Micron’s production.
Despite its current success, there are concerns about Samsung Electronics losing its market leadership to competitors like SK Hynix. The emergence of SK Hynix as a major player in the memory chip segment, particularly with the mass production of HBM3E, poses a threat to Samsung’s dominance. Market analysts like Mehdi Hosseini of Susquehanna International Group have noted that Samsung is now merely riding the wave of cyclical recovery, compared to its previous position as a leader in memory, smartphones, and display innovations.
Future Outlook and Strategic Partnerships
Looking ahead, Samsung is poised to face stiff competition not only from traditional rivals like SK Hynix but also from new entrants in the semiconductor manufacturing space. Countries like Japan, through the Rapidus Corporation, are gearing up to mass produce advanced 2-nanometer chips from 2027 with substantial government subsidies. To stay ahead, Samsung needs to continuously innovate and adapt to the evolving market dynamics in the memory chip and AI sectors.
While Samsung’s first-quarter results reflect a remarkable financial performance, the company must remain vigilant and responsive to the changing landscape of the semiconductor industry. By leveraging its expertise in memory chips and staying at the forefront of AI-related technologies, Samsung can sustain its position as a key player in the global market.