Samsung Electronics has estimated 15-fold increase in its second-quarter operating profit, attributing the surge to a rebound in semiconductor prices driven by booming demand in the artificial intelligence (AI) sector.
The company expects an operating profit of 10.4 trillion won (USD 7.54 billion) for the quarter ending 30 June, a decent rise from 670 billion won during the same period last year. This estimate surpasses the 8.8 trillion won forecasted by LSEG SmartEstimate, making it the most profitable quarter since the third quarter of 2022.
The dramatic profit increase is largely due to higher chip prices and the reversal of previous inventory writedowns. DRAM chip prices jumped between 13 per cent and 18 per cent during the second quarter, while NAND Flash chip prices rose by 15 per cent to 20 per cent, significantly boosting Samsung's semiconductor division. Additionally, the company's revenue is projected to increase by 23 per cent year-over-year, reaching 74 trillion won.
Samsung's semiconductor division is expected to post its second consecutive quarterly profit, thanks to the rising demand for high-end DRAM chips and those used in data centre servers and AI services. However, TrendForce predicts a slower price increase for memory chips in the third quarter, with an expected 5 per cent to 10 per cent rise for both DRAM and NAND Flash chips. Despite this, demand for advanced chips such as high bandwidth memory (HBM) and solid-state drives (SSDs) is anticipated to remain strong.
The company continues to face competition in the high-end chip market, particularly from South Korean rival SK Hynix, which has been leading in supplying high-end HBM chips to major customers like Nvidia. Investors are closely watching for approval of Samsung's latest fourth-generation HBM chips for Nvidia, following previous issues related to heat and power consumption.
In a strategic move to address ongoing challenges, Samsung replaced the chief of its semiconductor division in May, aiming to overcome what it described as a "chip crisis." The detailed earnings report for the second quarter is scheduled for release on 31 July, providing further insights into the company's performance and future outlook.
(Inputs from Reuters)
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