Samsung Electronics has announced a substantial surge in its second-quarter operating profit, driven by a dramatic increase in demand for AI-related chips.
The company reported a more than 15-fold rise in operating profit for the April-June period, reaching 10.4 trillion won ($7.52 billion), compared to just 670 billion won a year earlier.
The surge in semiconductor prices, fueled by the booming AI sector, has significantly boosted Samsung’s earnings. The world’s largest manufacturer of memory chips, smartphones, and TVs benefited from a rebound in chip prices and a resurgence in demand for high-end DRAM chips, including high bandwidth memory chips used in AI chipsets.
Samsung forecasted that AI servers will command a larger share of the memory market in the latter half of 2024, as major cloud service providers and enterprises continue to ramp up their AI investments. The company highlighted that “in the second half of 2024, AI servers are expected to take up a larger portion of the (memory) market.”
Samsung’s share price rose by 0.7% in morning trading, outperforming the 0.3% gain in the benchmark index.
The chip division reported a profit of 6.45 trillion won, its highest since the second quarter of 2022 and marking its second consecutive profitable quarter. This performance was largely driven by robust demand for DRAM chips and AI-related components, which have helped to lift chip prices.
Revenue from HBM chips saw a significant increase, rising approximately 50% from the previous quarter. South Korean rival SK Hynix, a leading producer of HBM chips, also reported strong demand for AI chips, posting its highest quarterly profit since 2018.
Samsung has yet to match AI chip leader Nvidia’s standards for its latest fifth-generation HBM chips, known as HBM3E. However, Samsung’s fourth-generation HBM3 has been approved by Nvidia for use in its H20 graphics processor, designed for the Chinese market.
Samsung anticipates that HBM3E chips will make up 60% of its HBM sales by the fourth quarter, pending final approval from Nvidia.
With Samsung focusing production on HBM, server DRAMs, and server solid-state drives for AI applications, the supply of conventional PC and mobile memory chips is expected to be constrained in the second half of the year.
The mobile devices sector experienced a drop in second-quarter operating profit, falling by approximately 810 billion won from the previous year due to increased parts costs. Despite steady smartphone shipments of 54 million units, Samsung expects overall smartphone demand to rise in the latter half of 2024, driven by growing interest in premium products with AI capabilities and accessories like smartwatches.
Earlier this month, Samsung launched its latest AI-enabled flagship foldable phones and mobile accessories, aiming to compete with Apple in the premium smartphone market. The new offerings include a health-monitoring ring, reflecting Samsung’s commitment to innovation in the high-end mobile segment.
