Samsung's Q2 Profit Surges 13-Fold With Chip Market Recovery.

In its earnings guidance, the South Korean tech giant Samsung projected an operating profit of 14 trillion won ($11 billion) for Q2’24. Analysts at LSEG SmartEstimate, comprising 27 analysts, forecasted a strong operating profit of 8.8 trillion won ($6.32 billion) for the recently concluded quarter.

While this is slightly less than the expected profit margins, the quarterly profits translate into a 13-fold increase for the firm, representing the highest profit since Q3’22.

Samsung’s stellar quarterly profit was fueled by a surge in memory chip prices, prompted by weak post-pandemic demand for consumer electronics.

Samsung Q2 Profit Rise

The escalating demand for Samsung’s DRAM and NAND memory chips has driven the company’s exceptional profit growth. The firm’s impressive sales to data centers and the expanding AI-powered device market have fueled the development of these core semiconductor offerings since 2022, underscoring how AI innovation is propelling increased demand for Samsung’s chips. Global DRAM and NAND Flash shipments increased 9% and 2% year-over-year, respectively, by the end of June. 

Aside from the surging demand, the sharp rise in pricing for Samsung’s memory chips was a primary catalyst behind the company’s remarkable profit growth. In Q2 alone, the costs of DRAM chips used in tech devices spiked by 13% to 18% compared to the last quarter, while NAND Flash chips for data storage saw 15% to 20% price hikes. 

These substantial price alterations, combined with the heightened demand, resulted in an exceptional 4.6 trillion won in operating profit for Samsung’s chip division in Q2 – a notable recovery from the 4.36 trillion won loss reported in the same period last year. 

However, the impact of inflation-driven declines in consumer spending, coupled with the substantial costs incurred in developing AI capabilities for its devices, resulted in a slowdown across Samsung’s global smartphone and TV segments, weighing on the tech giant’s overall profitability. Samsung now expects 2.2 trillion Koren won in gains from its smartphone sales in Q2, a notable decline from a 3.04 trillion won profit last year.

Analysts View and Predictions for Q2

After Samsung’s preliminary report on its first quarterly profits of over 6.6 trillion won, representing a 931.3% on-year rise, analysts predicted an impressive performance in its second quarter. They cited continual price hikes and the possible supply of HBM memory chips to AI semiconductor manufacturers throughout the quarter.

Hi Investment & Securities Co. predicted that Samsung would amass almost 8.1 trillion won in quarterly gains and about 71 trillion won in revenue by the end of June. 

The firm’s analyst Song Myung-seop hinted that Samsung could start selling its HBM chips to Nvidia in the second quarter. 

On April 8, IBK Investment & Securities Co analyst Kim Un-ho also commented on Samsung’s expected market performance: “As semiconductor profitability enhances due to the price rebound, Samsung’s quarterly profitability will continue to improve. The company’s HBM sales are also expected to enter the market of high-performance semiconductors.”

Mirae Asset analyst Kim Young-gun also forecasted Samsung’s outstanding performance, suggesting the company could nearly surpass HBM3E, the top-performing DRAM chip for AI applications, in the second half. Kim highlighted Samsung’s potential cost-competitiveness amid rising NAND demand and anticipated profitability in its foundry business, buoyed by an all-time high order backlog.

Samsung’s incredible market performance is a testament to the chip market comeback fueled by growing AI developments.