Samsung’s logo is displayed in its pavilion at Mobile World Congress in Barcelona, Spain on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)
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Samsung Electronics on Wednesday Reports better-than-expected second-quarter earnings Operating profit rose 3.5% from the same period a year ago as demand for advanced memory chips, which are essential for training artificial intelligence, remained strong.
Below is Samsung’s second quarter performance compared to average analyst estimates from LSEG.
- Revenue: 74.7 trillion Korean won (approximately $53.45 billion) vs. 73.74 trillion Korean won
- Operating income: 10.44 trillion Korean won vs. 9.53 trillion Korean won
Samsung’s sales for the quarter ending in June rose 23.42 percent from a year earlier, while its operating profit rose 1,458.2 percent.
The South Korean giant said strong demand for traditional memory such as high-bandwidth memory and regular dynamic random access memory from customers expanding their AI investments contributed to the strong performance.
Looking at the second half of the year, Samsung said it expects demand for server AI to remain strong across its server products, including HBM, server DRAM and SSDs. SSDs (solid-state drives) refer to semiconductor-based storage devices.
The company added that expanding production capacity to meet demand for HBM and server DRAM could further constrain supplies of traditional memory. Tips.
In its earnings release, the company said it plans to meet AI demand by expanding production capacity in the second half of the year and ramping up sales of its latest AI memory product, HBM3E.
In addition, sales of SSDs, which are in high demand for AI servers, will also expand.
The company also announced that it would pay a dividend of 361 won per common and preferred share for the second quarter.
“According to our current dividend policy, the total dividend for the quarter will be approximately 2.45 trillion won, which will be paid around the end of August.”
Samsung shares were up 1.35% on Wednesday morning.
The power of memory
HBM memory chips are crucial for AI chips, and the AI boom has seen demand soar, benefiting companies such as Samsung Electronics and SK Hynix, the world’s top two memory chip makers.
“Memory average selling prices are expected to continue their upward trend over the next few quarters, and Samsung Electronics expects its profits to increase every quarter through 2025,” CLSA said in a report released following Samsung’s second-quarter outlook earlier this month.
Business at the world’s largest memory chip maker is recovering, Memory chip prices rebounded last year on hopes for AI.The South Korean electronics giant suffered record losses in 2023 as the industry was hit by a post-COVID slump in demand for memory chips and electronic equipment.
“Following the recent release of AI semiconductor roadmaps by Nvidia and global chipmakers, we expect memory prices to trend upwards through the first half of 2025. We believe this is due to growing concerns over memory supply amid robust demand for HBM and high-density enterprise SSDs, which use more wafers and have longer production lead times,” SK Kim of Daiwa Capital Markets said in a report last month.
Samsung reportedly passed the test SK Hynix has announced that it has adopted HBM3 chips for Nvidia processors for the Chinese market. SK Hynix has led the HBM memory chip market as the sole supplier of HBM3 chips to Nvidia.
SK Hynix on Thursday posted its highest quarterly profit since the second quarter of 2018, recovering from a loss of 2.88 trillion won in the same period last year.
Weakening demand for smartphones
Smartphone sales in the second quarter fell mainly due to a “base effect from new model launches” in the first quarter, but Samsung said it continues to see strong demand for its Galaxy S24 series.
“Demand for smartphones declined quarter-on-quarter during a seasonally weak quarter, particularly in the premium segment,” the company said, adding that while it expects the premium segment to grow in the second half of the year, the mass segment is likely to slow down.
Profitability in the smartphone business also declined due to rising prices of key components.
The company plans to continue selling its premium Galaxy AI products going forward. Samsung’s latest move was last week. Latest Galaxy devices now available worldwide Galaxy Z Fold6, Z Flip6, Watch Ultra, Ring, etc.
“Even in challenging circumstances, we will continue to invest in upgrading our Galaxy AI capabilities to ensure a long-term sustainable growth engine,” Samsung said on Wednesday.
Counterpoint Research said Samsung is expected to see “significant improvement in its operating performance” in the second half of the year, mainly due to the trend toward “premiumization” of memory chips and smartphones.
“SK Hynix and Micron will continue to challenge Samsung in the memory space, both in the AI space through the growth of HBM, and in the AI smartphone and PC markets through close partnerships and optimizations with major computing companies such as Qualcomm, Intel and Nvidia,” Neil Shah, vice president of research at Counterpoint Research, said in emailed comments to CNBC.