Samsung Estimates 15-fold Second-Quarter Profit Jump

A woman walks past a new flagship store of Samsung Electronics at the Gangnam district in Seoul on June 28, 2023. (Jung Yeon-je / AFP via Getty Images)

Samsung Electronics estimated its second-quarter operating profit increased more than 15-fold as widespread demand for artificial intelligence (AI) products helps boost semiconductor prices.

The Suwon, South Korea-headquartered company said in preliminary earnings guidance on July 5 that its operating profit for the three months to June 30 likely rose to 10.4 trillion Korean won ($7.50 billion), compared to a profit of 670 billion won ($485 million), for the same period last year, marking a 1452.2 percent increase year on year.

That figure, beating analyst expectations for a profit of 8.8 trillion won ($6.3 billion), would give the company itds most profitable quarter since the third quarter of 2022.

Revenue at the world’s biggest chip maker also rose 23 percent in the second quarter compared to the same period a year prior; to 74 trillion won ($53.6 billion ), Samsung said.

Those preliminary earnings come after the company reported a 932.8 percent jump in operating profits in the first quarter ending March.

The preliminary earnings boost comes after an 85 percent drop in annual profit last year as post-pandemic demand for electronics and memory chips waned.

Samsung will release its comprehensive earnings at the end of this month.

AI Development Fuels Chip Demand

The results come as big tech companies race to fuel AI development, prompting an increased need for memory chips, including cutting-edge D-Ram chips like High-Bandwidth Memory (HBM) chips, which are essential for developing complex AI chipsets used in data center servers and gadgets that run AI services.

Samsung said in April that it plans to continue to increase HBM chip supply this year to “respond to growing demand for generative AI.”

“In D-RAM, the company plans to accelerate 1b nanometer-based 32Gb DDR5 supply with faster ramp-up speeds and further strengthen its competitiveness in the high-density DDR5 module market,” Samsung said at the time. “For NAND, the Company plans to enhance technology leadership by mass producing quad-level cell (QLC) for V9 in the third quarter.”

D-RAM chip prices were up 13 to 18 percent in the second quarter while prices of Nand flash memory chips, which are used for data storage, rose 15 to 20 percent, according to market researcher TrendForce.

Still, Samsung continues to struggle to catch up with its rivals, including U.S. memory chip rival Micron Technology and South Korean semiconductor maker SK Hynix, to mass produce and supply advanced HBM chips to customers like Nvidia.

Despite the better-than-expected operating profit reported by Samsung, analysts still expect the company’s mobile business operating profit likely took a hit in the second quarter, in part due to higher costs and higher marketing and development costs channeled into its AI services.

The electronics maker likely reported an operating profit of around 2.2 trillion won ($1.5 billion), according to a Reuters average of forecasts from 10 analysts, down from a 3.04 trillion won ($2.4 billion) profit a year ago.

Samsung plans to launch its latest foldable phones, which are integrated with AI features, next week in Paris.

Shares of Samsung were up 2 percent on Friday morning and are up nearly 9 percent to date.

Reuters contributed to this report.