In a remarkable turn of events, Samsung Electronics has announced a staggering surge in its first-quarter operating profit, largely driven by the burgeoning demand for artificial intelligence (AI) and the tightening supply of high-end chips. The South Korean tech giant’s optimistic outlook has sent its shares soaring by 1.8% on Tuesday, following a report of more than a 10-fold rise in operating profit.
Samsung’s strategic forecast suggests a sustained demand for AI technology, leading the company to ramp up the production of high bandwidth memory (HBM) chips. The plan includes a notable increase in the supply of HBM-related chips, aiming to surpass last year’s output by more than three-fold. This move is strategically aligned with the company’s goal to capitalize on the AI boom, a trend that has notably favored its competitors such as SK Hynix.
With the commencement of mass production of the latest 8-layer HBM3E chips for generative AI chipsets, Samsung is positioning itself to cater to the surging demand in the AI market. Furthermore, plans are underway to introduce a 12-layer version of HBM3E chips in the second quarter, with expectations that these advanced products will dominate two-thirds of Samsung’s HBM output by the end of the year.
Industry analysts foresee Samsung’s 8-layer HBM3E chips catering to AI leader Nvidia, while the 12-layer version is expected to serve both Nvidia and AMD. This strategic segmentation leverages Samsung’s technological advantage in high-stacking capabilities, complemented by SK Hynix’s strengths in the 8-layer segment.
The company’s remarkable performance extends beyond chip production, as it anticipates tighter supply in high-end memory chips towards the year-end. This projection is partly attributed to Samsung’s concerted efforts in focusing on HBM production, echoing sentiments expressed by SK Hynix last week.
Samsung’s impressive first-quarter revenue reflects a 13% increase, with memory chip revenue experiencing a remarkable 96% surge. Operating profit has surged to 6.6 trillion won, marking the highest figure since the third quarter of 2022. Notably, the chip division, historically Samsung’s cash cow, has returned to profitability after a challenging period, contributing significantly to the company’s overall performance.
The uptick in operating profit is further buoyed by substantial increases in NAND flash and DRAM chip prices during the first quarter. This upward trajectory underscores the resilience of Samsung’s memory chip business amid a dynamic market landscape.
Despite the challenges posed by rising costs, including increased memory chip prices, Samsung’s mobile devices business has maintained profitability. The introduction of AI functionalities in its flagship Galaxy S24 smartphones has garnered significant traction among consumers. Approximately 50% of S24 customers cite AI features as a reason for purchase, with 60% regularly utilizing these capabilities.
The tech giant’s resilience in navigating market dynamics underscores its adaptability and strategic foresight. With a firm focus on AI-driven technologies and high-end chip production, Samsung is well-positioned to capitalize on the burgeoning demand for innovative solutions in the global market landscape. As the company continues to innovate and expand its product offerings, its trajectory toward sustained growth remains promising.