Samsung Electronics Co. has reported a remarkable surge in profits, marking its strongest growth in years, fueled by robust demand for memory chips amidst a global resurgence in AI development. The South Korean tech giant announced a staggering 15-fold increase in operating profit to 10.4 trillion won ($7.5 billion) for the June quarter, surpassing analysts’ expectations. Sales also saw a substantial rise of approximately 23%, marking the largest increase since the peak of the Covid-19 era in 2021. Following the announcement, Samsung’s stock climbed 3%, reaching its highest level since January 2021.
The recovery in the $160 billion memory market this year has been pivotal for Samsung, which endured a downturn post-Covid. Increased demand from data centers and AI applications has driven up average memory chip prices by 15% from the previous quarter, according to CLSA estimates. This resurgence has not only bolstered Samsung’s largest division but also reversed losses incurred in the previous year.
The positive earnings report has spurred a broader rally across the semiconductor sector. Stocks like Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc all experienced gains in response to Samsung’s robust performance.
Analysts attribute the strong performance to rising demand for AI servers and enterprise data storage, which lifted both DRAM and NAND prices. Sanjeev Rana from CLSA Securities Korea highlighted that Samsung’s foundry operations also benefited from improved IT demand.
Despite these gains, concerns linger over Samsung’s competitive position in AI chips compared to SK Hynix Inc., which has emerged as a leader in high-bandwidth memory (HBM). Samsung faces challenges in getting its latest HBM chips certified by Nvidia Corp., a critical player in AI hardware.
In addition to market challenges, Samsung is contending with internal labor disputes. Recently, the company faced a strike involving a small number of staff, marking its first such incident in 55 years. A larger walkout is planned by union organizers amidst a pay dispute, potentially impacting operations at key chip plants.
Looking ahead, Samsung aims to strengthen its foothold in AI memory while navigating concerns of oversupply in the semiconductor market. The company’s strategic focus includes expanding its AI chip business while continuing to leverage its strong position in smartphones, evidenced by an upcoming Galaxy Unpacked event in Paris.
For more detailed insights, read the full article on Bloomberg.
