The Samsung logo is on display at their pavilion through the Mobile World Congress in Barcelona, Spain, on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
Samsung Electronics on Wednesday reported higher-than-expected second-quarter revenue and operating profit, as demand for its advanced memory chips which are crucial for artificial intelligence training remained strong.
Listed below are Samsung’s second-quarter results versus analysts’ average estimates in response to LSEG.
- Revenue: 74.07 trillion Korean won (about $53.45 billion) vs. 73.74 trillion Korean won
- Operating profit: 10.44 trillion Korean won vs 9.53 trillion Korean won
Samsung’s revenue for the quarter ended June jumped 23.42% from a yr earlier, while operating profit soared 1,458.2%.
The South Korean giant said robust demand for high-bandwidth in addition to conventional memory, comparable to regular dynamic random access memory, from customers expanding AI investments contributed to the strong performance.
For the second half, Samsung said it expects the demand from server AI to remain strong across server products including HBM, server DRAM and SSD. SDD, or solid-state drive, refers to a semiconductor-based storage device.
The firm added that expanding capability to fulfill demand for HBM and server DRAM could further constrain supply of conventional memory chips.
During its earnings call, the firm said it plans to deal with the AI demand by expanding sales of HBM3E —the newest AI memory product — through capability expansion within the second half.
It should also expand sales of SSDs that are currently in high demand for AI servers as well.
The firm also said it might pay out a dividend of 361 won per common and preferred share for the second quarter.
“In keeping with our current dividend policy, the full amount distributed per quarter amounts to roughly 2.45 trillion won, which can be paid near the top of August.”
Samsung shares rose as much as 1.35% Wednesday morning.
Memory momentum
HBM memory chips are crucial for AI chips – which have seen an enormous demand enabled by the AI boom. This has largely benefitted firms such Samsung Electronics and SK Hynix, the highest two memory chipmakers on the planet.
“With memory’s average selling prices expected to proceed their uptrend for next several quarters we foresee a quarterly sequential profit growth for Samsung Electronics until 2025,” CLSA said in a report earlier this month following Samsung’s second-quarter forecasts.
Business for the world’s largest memory chip maker rebounded as memory chip prices recovered on AI optimism last yr. The South Korean electronics giant saw record losses in 2023 because the industry reeled from a post-Covid slump in demand for memory chips and electronics.
“After Nvidia and global chip makers announced an AI semiconductor roadmap recently, we foresee a memory price hike trend until 1H25. We attribute this to greater concerns about memory supply amid robust demand for HBM and high density enterprise SSD, which use more wafers, with increased production lead time,” SK Kim of Daiwa Capital Markets said in a report last month.
Samsung reportedly has cleared the tests for the usage of its HBM3 chips in Nvidia processors for the Chinese market. SK Hynix has thus far led the HBM memory chip market, having been the only supplier of HBM3 chips to Nvidia.
SK Hynix on Thursday logged its highest quarterly profit because the second quarter of 2018, rebounding from a lack of 2.88 trillion won in the identical period a yr ago.
Weaker smartphone demand
Smartphone sales declined within the second quarter largely due to the “base effect of launches of latest models” in the primary quarter. Nevertheless, the Galaxy S24 series continued to see strong demand, Samsung said.
“Smartphone demand decreased sequentially within the seasonally weak quarter, particularly within the premium segment,” the corporate said, adding that it expects the premium segment to grow within the second half though the mass segment would likely see a slowdown.
Profitability within the smartphone business also dropped as prices of key components rose.
The firm plans to proceed pushing its premium Galaxy AI products. In its latest move, Samsung announced last week global availability for its newest Galaxy devices including Galaxy Z Fold6, Z Flip6, Watch Ultra and Ring.
“Even in difficult circumstances, we’ll proceed investing in upgrading Galaxy AI functionality with a view to secure an extended term sustainable growth engine,” Samsung said on Wednesday.
Counterpoint Research said Samsung should see “greater uptick to its operational performance” within the second half, mainly driven by memory chips and a “premiumisation” trend of smartphones.
“SK Hynix and Micron though will proceed to challenge Samsung in memory each within the AI segment with HBM growth and within the AI smartphone and PC market as well with close tie-ups and optimizations with key compute players comparable to Qualcomm, Intel and Nvidia,” Neil Shah, research vp at Counterpoint Research, said in emailed comments to CNBC.
