Samsung Electronics Co. has reported its most impressive sales and profit growth in recent memory, driven by a resurgent demand for memory chips amidst a global AI boom. The tech behemoth posted a jaw-dropping 15-fold surge in operating profit, totaling 10.4 trillion won ($7.5 billion) for the second quarter, far exceeding analysts’ expectations. Sales also saw a robust increase of approximately 23%, marking the largest uptick since the peak of the Covid-19 pandemic in 2021. As a result, Samsung’s stock surged 3%, hitting its highest level since January 2021.
The recovery in the $160 billion memory market this year has been pivotal for Samsung, which faced a severe downturn post-Covid. The surge in demand, particularly from data centers and AI development, propelled average memory chip prices up by 15% from the previous quarter, according to CLSA estimates. This resurgence not only bolstered Samsung’s largest division but also reversed losses incurred last year.
Samsung’s depositary receipts in London also saw a significant uptick, rising by approximately 4% during New York trading hours. This positive performance triggered a broader rally across the semiconductor sector, with stocks like Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc all witnessing gains.
Sanjeev Rana, an analyst at CLSA Securities Korea, attributed the rise in both DRAM and NAND prices to increased demand for AI servers and enterprise data storage, which helped alleviate inventory valuation losses. Additionally, Samsung’s foundry operations benefited from improved IT demand, further enhancing its quarterly performance.
Despite these achievements, concerns loom over Samsung’s competitive standing in AI chips compared to SK Hynix Inc., its smaller rival currently leading in high-bandwidth memory (HBM). Samsung has faced challenges in certifying its latest HBM chips by Nvidia Corp., a critical player in AI hardware.
Compounding matters, Samsung is navigating internal challenges, including potential disruptions from a planned three-day walkout by union organizers involving over 28,000 members, including key chip plant employees, over a pay dispute. This unrest follows a recent strike, the first in Samsung’s 55-year history, involving a small number of staff.
Looking forward, Samsung remains focused on expanding its footprint in AI memory while addressing concerns of oversupply in the semiconductor market. The company aims to leverage its upcoming Galaxy Unpacked event in Paris to sustain momentum for its smartphones, a segment that has historically helped mitigate sluggish chip demand.
For more detailed insights, read the full article on https://www.bloomberg.com/news/articles/2024-07-04/samsung-s-profit-grows-fastest-in-years-after-ai-propels-chips?srnd=technology-vp
