Samsung Electronics, the world’s largest storage chip manufacturer, reported a significant 932.8% increase in profit for the first quarter ending at the end of March.
After the end of the COVID-19 pandemic, chip demand declined, leading to record losses for the South Korean electronic giant in 2023. Now, with the thriving development of artificial intelligence (AI), storage chip prices have rebounded from a severe downturn, with Samsung Electronics’ storage chip sales increasing nearly twofold year-on-year in the first quarter.
Samsung stated that strong sales of their flagship product, the Galaxy S24 smartphone, and rising memory chip prices contributed to first-quarter revenue of 71.92 trillion Korean won (approximately $523 billion), slightly exceeding analysts’ expectations of 71.04 trillion Korean won. Profit amounted to 6.61 trillion Korean won, surpassing market expectations of 5.94 trillion Korean won.
In comparison to the previous year, Samsung’s first-quarter revenue increased by 12.81%, with profit soaring by 932.8% year-on-year.
Citigroup analysts noted that considering the future demand for AI computing, they see potential growth for Samsung’s NAND flash memory business.
They predict that storage (HDD) will become the next bottleneck for AI computing, especially in AI training, and expect Samsung Electronics to be one of the major beneficiaries of strong demand for AI training solid-state drives (SSD).
Samsung is the world’s largest manufacturer of dynamic random-access memory (DRAM) chips, commonly used in various consumer devices including smartphones and computers.
Samsung expects the second quarter to be mainly driven by the demand for generative AI, with mobile device demand remaining steady. However, they anticipate a seasonal impact on personal computer demand, which may lead to inventory adjustments by customers before the release of new products in the second half of 2024.
In the first quarter, Samsung’s semiconductor business recorded a profit of 19.1 trillion Korean won, compared to a loss of 4.58 trillion Korean won in the same period last year and a loss of 2.18 trillion Korean won in the fourth quarter.
As AI models become more complex and datasets grow larger, these models require memory chips with larger capacity and faster speeds.
To meet future demands, Samsung announced the start of mass production of HBM3E 8H and V9 NAND in April. They plan to begin mass production of HBM3E 12H in the second quarter, which offers over 50% more bandwidth and capacity than HBM3E 8H.
Samsung predicts that despite macroeconomic uncertainties and geopolitical tensions, the operating environment in the second half of the year will “maintain positive demand”.
They also stated that the development of the 3nm and 2nm processes is progressing smoothly. Samsung began mass production of 3nm chips in 2022 and plans to start mass production of 2nm chips in 2025.
Samsung highlighted the strong sales of their latest smartphone series, Galaxy S24, which helped boost revenue and profit in their mobile device business. However, the company warned that second-quarter demand for smartphones may decline due to seasonal factors, with a rebound expected in the second half of the year.
Competition in the semiconductor manufacturing field is intensifying as many countries worldwide are investing in this sector. Earlier this month, the Biden administration agreed to provide up to $6.4 billion in funding to Samsung for the establishment of a new chip plant in Texas.
At the same time, Micron and TSMC will also receive US government funding to promote chip manufacturing within the country.
Samsung and TSMC will face competition from Japan’s Rapidus Corporation, which recently received a $38.9 billion subsidy from the Japanese government to start large-scale production of 2nm chips starting in 2027.
Some analysts are concerned that Samsung Electronics’ leading position in memory chips could be overtaken by competitors like SK Hynix.