TLDR
Samsung expects its Q2 2024 profits to increase by about 1,400% compared to the same period last year
The company forecasts an operating profit of 10.4 trillion won ($7.54 billion) for Q2 2024
This surge is largely attributed to increased demand for advanced chips due to the AI boom
Memory chip prices have risen significantly, with DRAM up 13-18% and NAND Flash up 15-20% in Q2
Samsung faces a possible three-day strike starting July 8th due to a wage dispute with workers
Samsung Electronics, the world’s largest maker of memory chips, smartphones, and televisions, has announced a staggering profit forecast for the second quarter of 2024.
The South Korean tech giant expects its operating profit to soar by approximately 1,400% compared to the same period last year, largely driven by the booming demand for advanced chips used in artificial intelligence (AI) applications.
According to Samsung’s financial guidance released on July 5th, the company projects an operating profit of 10.4 trillion won ($7.54 billion) for the April-June quarter.
This figure significantly outpaces the earlier market expectations of 8.8 trillion won, as estimated by LSEG SmartEstimate. The forecasted profit represents a fifteen-fold increase from the 670 billion won reported in the second quarter of 2023.
The company also anticipates a substantial rise in sales, projecting a 23% increase to 74 trillion won. This marks the largest growth since the peak levels observed during the Covid-19 pandemic in 2021.
The primary driver behind this dramatic turnaround is the surging demand for memory chips, particularly those used in AI applications.
The widespread adoption of AI technologies has led to a significant uptick in demand for high-end DRAM chips, such as high bandwidth memory (HBM) chips used in AI chipsets, as well as chips used in data center servers and devices running AI services.
Marc Einstein, chief analyst at Tokyo-based research and advisory firm ITR Corporation, commented on the trend: “Right now we are seeing skyrocketing demand for AI chips in data centers and smartphones.” He added, “The AI boom which massively boosted Nvidia is also boosting Samsung’s earnings and indeed those of the entire sector.”
This increased demand has resulted in a substantial rise in memory chip prices. During the second quarter, DRAM chip prices jumped by about 13% to 18% compared to the previous quarter, while NAND Flash chips used for data storage saw a 15% to 20% increase, according to data provider TrendForce.
Samsung’s semiconductor division, which had been struggling with losses in the previous year, is expected to be the primary beneficiary of this market shift. Analysts estimate the Q2 operating profit for Samsung’s chip division to be around 4.6 trillion won, a significant improvement from the 4.36 trillion won loss reported for the same period last year.
The company’s dominant position in the memory chip market puts it in a prime position to capitalize on this trend. According to TrendForce, Samsung held a 46.8% global share of DRAM output and a 32.4% share of NAND Flash output in 2023. Reports also suggest that Samsung’s HBM production has been sold out for 2024, indicating strong future demand.
However, while the semiconductor division is thriving, Samsung’s mobile business may face some challenges.
Despite shipping a similar number of smartphones compared to last year, the mobile division is expected to see its Q2 operating profit shrink.
This is attributed to steeper parts costs and higher marketing and development expenses for AI services. Analysts forecast an operating profit of around 2.2 trillion won for the mobile business, down from 3.04 trillion won a year ago.
Looking ahead, Samsung is set to compete with rival Apple at the high end of the market with the launch of its latest flagship foldable phones and mobile accessories, including a new health monitoring ring, scheduled for July 10th in Paris.
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