Samsung's First Quarter Profits Surge on Sales

Samsung Electronics Co. saw a huge growth in profit during the first quarter of 2024, driven by a significant turnaround in its semiconductor division and strong sales of Galaxy S24 smartphones.

The world’s leading memory chipmaker reported a preliminary operating profit of approximately 6.6 trillion won (R91 billion) on Friday, surpassing analyst estimates of 5.37 trillion won. This marked a substantial reversal from consecutive quarterly declines that began in the third quarter of 2022.

Revenue for the quarter reached about 71 trillion won, slightly below projections for 71.8 trillion won. Despite this, shares experienced a marginal 1% decline in early Seoul trading.

While revenue fell short of expectations, Tom Kang, Director at Counterpoint Research, noted that the preliminary results indicate Samsung’s return to normalcy. Kang emphasized that Samsung’s decision to reduce chip production was prudent, positioning the company to capitalize on the AI trend in both semiconductor and smartphone markets.

Samsung is set to unveil its total earnings, including divisional breakdowns, on April 30, offering a comprehensive view of its performance.

These results underscore a rebound in demand for memory chips, essential components powering modern electronics, following a significant industry downturn. South Korea’s chip exports surged by 35.7% year-on-year to $11.7 billion in March, the highest monthly sales total since March 2022.

Stronger pricing for memory chips has contributed to this recovery. Major DRAM producers increased prices by an average of 7% to 10% in the first quarter as inventory levels normalized for products like smartphones and PCs, according to Akshara Bassi, a Senior Analyst at Counterpoint Research.

Kyung Kye-hyun, Samsung’s CEO overseeing its semiconductor business, expressed optimism during the company’s annual shareholders’ meeting on March 20. He anticipated a recovery in the semiconductor business to 2022 levels this year as the prolonged market slump begins to wane. Samsung achieved operating profits exceeding 10 trillion won per quarter in 2022.

Kyung highlighted Samsung’s focus on its advanced packaging business, particularly after establishing a dedicated team last year. This optimism was echoed by Nvidia Corp. co-founder Jensen Huang, who endorsed Samsung as a supplier of high-bandwidth memory (HBM) chips, crucial components for graphic processors used in training AI systems.

HBM sales at Samsung surged by over 40% in the December quarter, signalling a recovery in memory demand. Bassi emphasized that AI-driven deployments will continue to drive demand, projecting sustained price increases throughout the year. Samsung’s latest high-capacity HBM product positions it well to capture AI-led deployments and potentially collaborate with Nvidia, further solidifying its position as a leading chipmaker.