Samsung flags strong AI demand as profits soar on higher chip prices. “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 said in a statement.

Samsung’s earnings result

Here are Samsung’s second-quarter results versus analysts’ average estimates according to LSEG.

Samsung revenue: 74.07 trillion Korean won (about $53.45 billion) vs. 73.74 trillion Korean won

Samsung operating profit: 10.44 trillion Korean won vs 9.53 trillion Korean won

The Samsung’s revenue for the quarter ended June jumped 23.42% from a year earlier, while operating profit soared 1,458.2%.

Samsung’s server AI demand

Rebounding semiconductor prices stoked by the AI boom lifted June quarter earnings for the world’s biggest maker of memory chips, smartphones and TVs from a low base a year ago.

The South Korean giant said robust demand for high-bandwidth as well as conventional memory, such as regular dynamic random access memory, from customers expanding AI investments contributed to the strong performance.

For the second half, Samsung said it expects the demand from server AI to stay strong across server products including HBM, server DRAM and SSD. SDD, or solid-state drive, refers to a semiconductor-based storage device.

Samsung expands sales

The firm added that expanding capacity to meet demand for HBM and server DRAM could further constrain supply of conventional memory chips.

During its earnings call, the firm said it plans to address the AI demand by expanding sales of HBM3E the latest AI memory product through capacity expansion in the second half.

It will also expand sales of SSDs which are currently in high demand for AI servers as well.

Memory chip rebound helped Samsung

HBM memory chips are crucial for AI chips, which have seen a huge demand enabled by the AI boom. This has largely benefited firms like Samsung Electronics and SK Hynix, tow of the top memory chipmakers in the world.

Business for Samsung rebounded as memory chip prices recovered on AI optimism last year. The South Korean electronics giant saw record losses in 2023 as the industry reeled from a post-Covid slump in demand for memory chips and electronics.

Samsung reportedly has cleared the tests for the use of its HBM3 chips in Nvidia processors for the Chinese market. SK Hynix has so far led the HBM memory chip market, having been the sole supplier of HBM3 chips to Nvidia.

Decline in smartphone sales

Samsung smartphone sales declined in the Q2 largely because of the “base effect of launches of new models” in the Q1. However, the Galaxy S24 series continued to see strong demand, Samsung said.

Profitability in the smartphone business also dropped as prices of key components rose.

The firm plans to continue pushing its premium Galaxy AI products. In its latest move, Samsung announced last week global availability for its newest Galaxy devices including Galaxy Z Fold6, Z Flip6, Watch Ultra and Ring.

Samsung stock update

The firm also said it would pay out a dividend of 361 won per common and preferred share for the Q2.

“According to our current dividend policy, the total amount distributed per quarter amounts to approximately 2.45 trillion won, which will be paid near the end of August.”

Samsung’s share price rose 0.9% in morning trade versus a 0.5% rise in the benchmark index.

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