Samsung’s Profits Skyrocket 15-Fold Amidst Memory Chip Revival

Samsung Electronics Co. has reported an impressive surge in sales and profits, reflecting a significant rebound in the memory chip market driven by global AI development. The world’s largest producer of memory chips and smartphones posted a staggering 15-fold increase in operating profit, reaching 10.4 trillion won ($7.5 billion) in the June quarter, surpassing analysts’ expectations. Sales grew by approximately 23%, marking the most substantial rise since the Covid-era highs of 2021. Following this announcement, Samsung’s stock climbed 3%, reaching its highest level since January 2021.

The resurgence in the $160 billion memory market has been fueled by a boom in data centers and AI development, pushing average memory chip prices 15% higher from the previous quarter, according to CLSA estimates. This demand surge has enabled Samsung’s largest division to recover from last year’s losses. Samsung’s depositary receipts in London were up roughly 4% at 9:45 a.m. New York time, sparking a broader rally in the chip sector, with companies like Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc seeing their stocks rise.

Both DRAM and NAND prices benefited from increased demand for AI servers and enterprise data storage, helping to reverse inventory valuation losses. Sanjeev Rana, an analyst at CLSA Securities Korea, noted that Samsung’s foundry operations also received a boost from improved IT demand. The results highlight how the memory market is recovering from a severe post-Covid downturn, driven by the rapid growth of AI applications.

South Korea’s government announced this week that the country exported a record number of semiconductors in June, driving its trade surplus to $8 billion — the largest since 2020. Samsung is set to announce final earnings with divisional breakdowns on July 31. While benefiting from a broader industry recovery, the company faces challenges in the AI chip market against SK Hynix Inc., which has become the leading supplier of high-bandwidth memory (HBM), a crucial component for AI hardware.

Despite these successes, Samsung is dealing with labor unrest as union organizers plan a three-day walkout among its 28,000-plus members over a pay dispute. This proposed action follows a strike involving a small number of staff last month, the first in the company’s 55-year history. The impact of the planned walkout on key chip plants remains uncertain.

Looking ahead, Samsung aims to secure a more substantial presence in the AI memory market while managing concerns about potential oversupply. SK Hynix recently reported its fastest revenue growth since at least 2010, leading to a 60% rally in its shares since the start of 2024, compared to an 8% gain for Samsung’s stock. In May, Samsung unexpectedly appointed Jun Young Hyun, a memory chip veteran, as the new leader of its most crucial business line, replacing Kyung Kye-hyun.

Samsung is also focusing on maintaining momentum in its smartphone segment, with a Galaxy Unpacked event scheduled in Paris next week. This event is part of the company’s strategy to capitalize on the steady demand for its smartphones amid the fluctuating chip market.

For more detailed insights, read the full article on Bloomberg.