Samsung Anticipated To Achieve Record Q1 Profit Amidst Surge in AI-driven Chip Demand
Samsung is anticipated to announce unprecedented profits as the demand for AI-driven chips propels a significant memory semiconductor supercycle.
Samsung Electronics is poised to announce a significant increase in first-quarter earnings, driven by rising memory chip prices spurred by the global investment boom in artificial intelligence (AI), as noted by analysts.
Samsung Electronics, the South Korean tech giant, is expected to report a six-fold increase in operating profit for the January–March period, setting a quarterly record and nearing its full-year earnings from the last business year. The company is anticipated to announce an operating profit of 40.5 trillion won ($26.9 billion), along with a 50% increase in revenue, according to an LSEG SmartEstimate derived from 29 analysts.
Samsung credited the momentum to what it has termed an “unprecedented supercycle” in memory chips. In comparison, the company reported an operating income of 43.6 trillion won for the entirety of last year. Certain analysts express heightened optimism, with Citigroup predicting that operating profit may soar to as much as 51 trillion won.
“You couldn’t ask for things to be better,” remarked Ko Yeongmin, an analyst at Daol Investment & Securities, highlighting the robustness of the memory chip market.
However, Samsung typically avoids offering detailed forward guidance until the full earnings report comes out later in the month.
Strong demand for high-performance chips used in AI data centers has fueled the wider semiconductor surge. However, analysts caution that the outlook is growing increasingly intricate.
Increasing geopolitical tensions and disruptions related to conflict have led to higher energy costs and heightened worries about possible supply chain bottlenecks for essential production materials. Certain analysts suggest that these factors may ultimately compel significant technology companies to reduce their investments in AI infrastructure.
Early indications suggest a decline in spot prices for DRAM (dynamic random access memory) chips, as rising costs for smartphones and computers start to impact consumer demand.
These concerns, along with the introduction of Google’s memory-optimizing technology known as TurboQuant, have contributed to the recent selloff in semiconductor stocks. Since the latest round of conflict began on February 28, Samsung shares have decreased by 14%. However, they are still up approximately 50% year-to-date, bolstered by significant AI-related capital expenditure plans from major technology companies, which are expected to drive demand for semiconductor products in the long term.
“Indeed, we have observed a decline in memory chip spot prices over the past 3-4 weeks.” “We are confident that this situation is temporary,” stated Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide.
“The demand and backlog remain robust,” he added, observing that it may take considerable time for supply to align with global demand.
Market research firm TrendForce anticipates that DRAM contract prices will keep climbing, forecasting a 58–63% increase in the April–June quarter following a doubling in the first quarter.
Last month, Samsung co-CEO Jun Young-hyun announced that the company is collaborating with major clients to transition to three-to-five-year contracts to mitigate exposure to demand fluctuations.
Analysts anticipate that other areas will face challenges, despite Samsung’s memory chip division leading in profits.
Analysts indicate that Samsung’s foundry division, which competes with TSMC in contract chip manufacturing, is anticipated to continue operating at a loss. Recently, the unit gained an advantage through a collaboration with Nvidia to develop AI inference processors.
According to Kiwoom Securities, Samsung’s smartphone and display divisions are expected to experience a profit decline of approximately 50% in the first quarter, attributed to rising memory costs and fierce market competition.
Samsung could encounter internal challenges, as labor unions in South Korea advocate for modifications to the company’s bonus structure and have signaled potential strike action in May, introducing further uncertainty to its outlook.
