Samsung Electronics has seen a remarkable 933% increase in first-quarter operating profits, driven by a recovery in chip prices and rising demand for AI-driven products. The company reported $52.2 billion in sales, up 13% year over year, falling slightly below expectations. Operating profit reached $4.8 billion, beating analysts’ forecasts and marking a turnaround after six consecutive quarters of profit decline.
Samsung faced a challenging period in 2022 and 2023 as memory chip prices plunged due to excess inventories built up during the pandemic. In response, the company made significant cuts to memory chip production to help normalize prices, resulting in a 20% increase in prices by the first quarter of 2024. Demand for Samsung’s HBM chips, crucial for AI processing, has also surged, contributing to the company’s profitability. Nvidia’s CEO recently announced plans to use Samsung’s new HBM chips for its graphics processing units.
Despite the surge in profits, Samsung has initiated an “emergency mode,” mandating a six-day workweek for executives to address challenges such as a depreciating Korean won, rising oil prices, and political risks. The company remains optimistic about the future, with strong demand expected for generative AI applications in the second half of 2024. Samsung’s new focus on AI-enabled smartphones and chips is crucial, as the company seeks to solidify its position as a leader in both markets.
Investors have shown optimism about Samsung’s semiconductor division, with shares rising 1.4% in early Seoul trading. The company plans to increase supply of HBM chips to meet the growing demand for generative AI. Samsung’s new Galaxy S24 series, launched in January, has helped the company reclaim its position as the largest smartphone maker. However, competition in the smartphone market, particularly from Chinese manufacturers with innovative 5G models, remains a challenge. Samsung plans to mass produce its next-generation HBM chips in the first half of 2024, as it aims to compete with SK Hynix as the primary supplier to Nvidia.
