In a dramatic turnaround, Samsung Electronics Co. has reported its most robust sales and profit growth in recent memory, buoyed by a resurgence in global demand for memory chips and advancements in artificial intelligence (AI) technology.
The Numbers Speak Volumes: A 15-Fold Surge in Profits
Samsung, renowned for its dominance in memory chips and smartphones, stunned analysts with a staggering 15-fold increase in operating profit, soaring to 10.4 trillion won ($7.5 billion) for the second quarter of the year. This impressive leap surpassed even the most optimistic projections, highlighting a remarkable recovery from the depths of the Covid-era downturn in 2023. Sales mirrored this upward trajectory, rising approximately 23% — the largest uptick since the peak of pandemic-driven demand in 2021. As a result, Samsung’s stock surged by 3%, marking its highest level since January 2021.
Behind the Numbers: Revival of the Memory Market
The revival of the $160 billion memory market has been pivotal, driven by a surge in demand from data centers and the rapid expansion of AI technologies globally. Average memory chip prices shot up by 15% from the previous quarter, according to CLSA estimates, which significantly bolstered Samsung’s largest division and reversed losses from the previous year.
Sector-wide Impact and Market Reactions
Samsung’s positive earnings report sparked a broader rally across the semiconductor sector, with major players like Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc all witnessing substantial gains. Analysts, such as Sanjeev Rana from CLSA Securities Korea, attributed the recovery to heightened demand for AI servers and enterprise data storage, which lifted prices of both DRAM and NAND chips and reversed previous inventory valuation losses.
Challenges and Future Outlook
Despite its strong performance, Samsung faces challenges in the competitive landscape of AI chips, where it lags behind SK Hynix Inc. in high-bandwidth memory (HBM) — a critical component for AI hardware. Issues obtaining certification for its latest HBM chips from Nvidia Corp., a leader in AI accelerators, underscore ongoing hurdles in this burgeoning market segment.
Internal Strife and Strategic Moves
Internally, Samsung is grappling with labor disputes as union organizers plan a three-day strike over pay disputes, potentially disrupting operations at key chip plants. This unrest comes amidst strategic moves within the company, including the appointment of Jun Young Hyun to lead its crucial memory chip business, aimed at bolstering its position in AI memory and navigating concerns of oversupply in the semiconductor market.
Looking Ahead
As Samsung prepares to unveil its final earnings with detailed divisional breakdowns on July 31, the company remains focused on expanding its footprint in AI technology while leveraging its strong smartphone business. With an upcoming Galaxy Unpacked event in Paris, Samsung aims to sustain momentum in its consumer electronics division.
For more insights, read the full article on Bloomberg.