Chip prices rebound, Samsung's Q1 operating profit reaches KRW 6.61 trillion, nearly ten times higher year-on-year 丨 Financial Report Insights

Thanks to the AI ​​development boom driving the rebound in storage chip prices, Samsung Electronics saw a significant increase in profit in the first quarter of this year, with its semiconductor business returning to profitability for the first time since 2022.

On April 30, Samsung disclosed its first-quarter financial data:

Operating profit increased to KRW 66.1 trillion (about USD 48.5 billion), a staggering 931.8% year-on-year increase.

Net profit was KRW 66.2 trillion, more than four times higher than the same period last year, exceeding analysts' average forecast of KRW 56.3 trillion.

Operating income grew by 13% year-on-year to KRW 71.9 trillion, with memory chip revenue increasing by 96% year-on-year to KRW 17.49 trillion.

These data indicate that Samsung is reversing a year-long performance slump caused by global economic uncertainty. After the semiconductor division incurred a loss of KRW 14.9 trillion in 2023, the company's overall operating profit plummeted to a 15-year low.

Now, there are signs that the market is gradually recovering, partly boosted by the demand for chips used in AI development following the introduction of ChatGPT. Samsung's chip division achieved an operating profit of KRW 19.1 trillion for the quarter, surpassing expectations and recovering from a loss of KRW 4.58 trillion in the same period last year. This is also the first time the division has returned to profitability after four consecutive quarters of losses. Early trade data released this month in South Korea showed that semiconductor exports in the first 20 days of April increased by 43% year-on-year, continuing to lead South Korea's export growth.

Media cited SK Kim from Daiwa Capital Markets as saying, "We believe the unexpected profit is due to the strong recovery cycle driven by AI and the rise in memory prices. We expect the company to lead a positive outlook for the memory market."

According to data provider TrendForce, in the first quarter, NAND flash memory chip prices for data storage rose by 23% to 28% compared to the previous quarter, while DRAM chip prices for various tech devices increased by about 20%.

In a statement, Samsung said, "Despite ongoing macroeconomic and geopolitical uncertainties, it is expected that the demand for generative AI will continue to remain strong around the second half of 2024, and the market conditions remain optimistic."

It is worth mentioning that Samsung's South Korean competitor SK Hynix also stated last week that the memory chip market is expected to fully recover with the growth in AI demand. Meanwhile, SK Hynix's financial report showed that its first-quarter revenue and profit exceeded expectations, with revenue reaching KRW 12.4296 trillion, more than doubling and hitting a historical high for the same period. First-quarter operating profit reached KRW 2.886 trillion, turning losses into profits year-on-year, with a significant increase compared to the previous quarter by 734% In addition, Samsung revealed during the financial report conference call that they are currently supplying 12-layer stacked HBM3E memory - 36GB HBM3E 12H DRAM samples, with plans to start mass production in the second quarter of this year. The 8-layer stacked HBM3 8H has also begun preliminary mass production this month.

Samsung also stated:

It is expected that by the end of this year, HBM3E will account for two-thirds of the total HBM sales.

Compared to last year, the company's HBM supply in 2024 is expected to increase at least threefold, with supply agreements already in place with customers.

It is projected that by 2025, the supply of the company's HBM chips will at least double compared to 2024.

As of the time of writing, Samsung's stock price has risen by 1.56%, reaching 77,900 Korean won. However, Samsung's stock price has still fallen by 2.14% since the beginning of this year.