Due to strong demand for artificial intelligence products, the storage chip market has quickly rebounded from last year’s slump, with Samsung Electronics expecting a 1452% increase in operating profit for the second quarter based on preliminary data from April to June, highlighting the current prosperity of artificial intelligence development.
On Friday, July 5th, Samsung Electronics announced its performance guidance for the second quarter of 2024. The guidance exceeded expectations, with projected operating profit for the second quarter expected to increase over 15 times to 104 trillion Korean won (75 billion USD), reaching the highest level since the third quarter of 2022.
Large tech companies are racing to develop their advanced artificial intelligence models, triggering demand for high-bandwidth memory (HBM) and other cutting-edge D-RAM chips. The world’s largest storage chip manufacturer has also seen a rebound in its business.
According to data from the London Stock Exchange Group (LSEG) SmartEstimates, this figure is far above analysts’ expectations of 88 trillion Korean won. Sales are also expected to increase by 23% year-on-year, reaching 740 trillion Korean won (534 billion USD).
Analysts expect Samsung’s chip business to achieve an operating profit of 50 trillion Korean won in the second quarter, compared to a loss of 44 trillion Korean won in the same period last year. They state that strong chip business revenue has offset the decline in profits from the smartphone business.
With its Galaxy S24 Ultra smartphone, Samsung has achieved great success in the field of generative artificial intelligence. The smartphone features AI for editing photos and online search capabilities, but increased material and marketing costs have eroded profits in that department.
Meanwhile, in response to increasingly fierce competition from Chinese rivals in high-profit areas, Samsung plans to launch its latest foldable smartphone with AI capabilities in Paris next week.
Boosted by optimistic guidance, Samsung’s stock price rose by 2.96% on the LSEG, reaching a high of 87,100 Korean won (63.16 USD). On Thursday, July 4th, Samsung’s stock price closed at 84,600 Korean won (61.35 USD), reaching its highest level since January 2021.
According to data from the Financial Times, Samsung’s stock price has risen by about 9% this year but lags far behind its competitor SK Hynix from Korea, which has seen a 62.5% increase. SK Hynix is the largest supplier of High Bandwidth Memory (HBM) chips for Nvidia’s artificial intelligence products.
Samsung has been striving to catch up with SK Hynix and Micron Technology from the United States in mass producing the most advanced HBM chips.
Both SK Hynix and Micron Technology supply HBM chips to Nvidia, and both companies have stated that the production capacity for HBM chips for this year and next year has been sold out.
Samsung’s HBM chips have not yet passed Nvidia’s qualification tests. Nvidia’s CEO, Jensen Huang, stated last month that more engineering work is still needed.