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Samsung’s Q1 Operating Profit Soars Tenfold Amid Chip Price Recovery and AI Boom

Samsung's Q1 net profit has surpassed market expectations, thanks to strong smartphone sales, recovering chip prices, and the growing demand for generative AI technologies

Samsung

Samsung Electronics, the flagship subsidiary of South Korea’s largest conglomerate, Samsung Group, has reported a nearly tenfold increase in its first-quarter operating profits compared to the previous year. The company attributes this remarkable growth to recovering chip prices and the surging demand for generative AI technologies.

Samsung’s operating profit for the quarter reached an impressive 6.61 trillion won ($4.85 billion), driven by the Memory Business’s return to profitability. The company’s strategic focus on high-value-added products, such as HBM (high-bandwidth memory) used in AI hardware, has proven to be a successful approach in the current market landscape.

In addition to the strong performance in the semiconductor sector, Samsung also benefited from robust smartphone sales, further contributing to the company’s overall success. The weakness of the Korean won against the US dollar also played a role, positively impacting the company’s operating profit by approximately 0.3 trillion won compared to the previous quarter.

Looking ahead, Samsung remains optimistic about the industry’s prospects, particularly in the realm of generative AI. As demand for on-device AI and high-resolution features continues to grow, the company is well-positioned to capitalize on these trends. Tommy Kwon, vice president of Samsung’s system LSI business, emphasized the company’s commitment to meeting this demand during an earnings conference call.

Samsung’s net profit of 6.75 trillion won surpassed market expectations, which had been estimated at 4.99 trillion won, according to a survey conducted by the financial data firm Yonhap Infomax. This impressive performance comes on the heels of a global economic slowdown that had previously impacted memory chip sales.

Industry experts believe that Samsung’s overall outlook is secure, thanks to a resurgence in the smartphone market, escalating DRAM prices, and a modest decline in Fed interest rates. Brady Wang, associate director of market research firm Counterpoint, noted that Samsung is strategically positioned to thrive amidst the evolving market conditions. However, he also stressed the importance of the company focusing on accelerating development in emerging areas like high-bandwidth memory, which is crucial for AI and high-performance computing.

The semiconductor industry is the backbone of the global economy, with chips being used in a wide range of products, from household appliances to advanced weapons systems. The success of generative AI products, such as ChatGPT, has further fueled the demand for the advanced chips that power these systems.

South Korea, in particular, has benefited from this trend, with semiconductors accounting for a fifth of the country’s total exports in March, reaching $11.7 billion – their highest level in almost two years. As the world’s largest memory chip maker, Samsung is poised to capitalize on this growing demand and maintain its leadership position in the industry.

Tom Kang, research director of Counterpoint, described Samsung’s earnings as a “surprise” due to the recovery in memory demand and the rebound in memory prices. He also noted that the market environment is becoming more favorable for Samsung, with the recovery in the smartphone market acting as an additional tailwind for the company.

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