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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The electronics leader forayed its latest line of flagship smartphones, the S23 series, furbishing the mobile division a good boost as expected from Samsung’s Q1 earnings forecast, but its biggest business of memory chips continued to fall, owing to waning demand.     

A Glance At Samsung’s Earnings Report:

Samsung’s revenue in 2023 Q1 was on par with analysts’ expectations – down 18 percent year-on-year at $47.6 billion (63.75 trillion Korean won).  

Samsung’s first-quarter profit, contradictory to its previous year’s performance of 14.12 trillion Korean won, was merely 640 billion Korean won, due to its chip division losses. 

Samsung’s Q1 Financial Results Heralds Road To Recovery

Samsung’s most lucrative profit-maker, its semiconductor division of memory chips that are present in several devices ranging from personal computers, and smartphones to servers, faced losses in 2023’s Q1. 

“A good recovery is coming. Despite poor profit numbers coming through, we are also seeing sharp prices stabilizing.”

The memory chip division’s profit declined from 8.45 trillion Korean won to 4.58 trillion won. The reason for the fall in prices of the memory chips can be attributed to the pandemic’s outrageous inventory when demand for consumer devices surged, but currently grapples with excessive stockpiling as consumers backtrack on purchases due to rising inflation. 

The road away from the disappointing financial performance of Samsung is long, but the electronic giant pins its hope on following the footsteps of foes such as SK Hynix and Micron, in making a ‘meaningful’ cut in memory chip production, whilst forecasting a recovery in the latter half of 2023. SK Hynix also reported a quarterly loss record this week. 

“Demand is expected to gradually increase amid projections of customer inventory levels having declined.”

Even with the picture of a limited recovery in demand, Samsung forecasts a boost in memory chip demands as newer smartphones, PCs and CPUs release into the market. Samsung’s stock was 0.6 percent higher than last week. 

Samsung’s Profit Decline Can Be Reversed

The latest tech company reporting earnings globally after US big tech Alphabet, Meta, and Microsoft,  Samsung’s Q1 revenue 2023 stark growth of 22 percent to 30.74 trillion won, compared to the prior year, was bolstered by the sales of its highest-priced smartphone – the $1,200 S23 Ultra. 

“Even amid weak smartphone demand due to lingering macro uncertainties, the premium market grew, both in volume and value.”

Though Samsung’s financial results dented a grueling quarter for the electronic maker, its resilience in the smartphone division sailed the ship through the tough times of the industry. Centering on the posterior of strong sales of S23 Ultra, Samsung’s earrings grew with profitability treading double-digits as a consequence of enhancing operational efficiencies. 

Samsung reclaimed its global top spot in the smartphone market share, even with a first-quarter profit drop attributed to a nosedive in smartphone shipments by 13 percent year-on-year. 

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