Samsung Profit Grows Fastest in Years After Chip Arm Recovery

Yoolim Lee

Wed, Jul 31, 2024, 7:51 AM3 min read

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(Bloomberg) -- Samsung Electronics Co. reported its fastest pace of net income growth since 2010 after artificial intelligence boom lifted earnings at its semiconductor division.

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The world’s largest maker of memory and smartphones posted a six-fold surge in net income to 9.64 trillion won ($6.96 billion) in the June quarter, versus the average analysts’ projection for 7.97 trillion won. Samsung earlier this month reported a 15-fold rise in preliminary operating profit and a 23% rise in revenue, the biggest gain in sales since 2021.

The beat suggests the global computing markets are emerging from a protracted post-Covid downturn, thanks in part to a wave of spending on AI development from the US to China. Like SK Hynix Inc., Samsung supplies the semiconductors used for storage in servers and mobile devices and also sells a plethora of consumer electronics.

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Samsung’s pivotal semiconductor unit posted a better-than-expected 6.45 trillion won operating profit, its second consecutive quarter in the black after four successive losses. It was boosted by rising memory prices and robust demand for high-bandwidth memory chips, or HBMs, which help conserve power while supporting faster processing speeds required by AI.

Investors have been concerned about Samsung’s market position in the fast-growing HBM market. Shares of Korea’s largest company have underperformed its smaller rival SK Hynix, now the leading supplier of HBMs. It’s struggled to get its latest chips certified by Nvidia Corp., which has become the world’s most valuable chipmaker thanks to insatiable demand for AI accelerators.

But Samsung is finally beginning to make progress in narrowing the gap with SK Hynix. It has won the long-awaited approval from Nvidia for a version of its HBM chips called HBM3, and it also anticipates approval for the next generation, HBM3E, in two to four months, Bloomberg News reported this week.

SK Hynix has been one of the main beneficiaries of a race to supply components essential to creating ChatGPT-like generative AI services. Revenue from its HBM chips, which are paired with Nvidia’s accelerators, surged more than 250% in the June quarter. That’s propelled a more than 150% rally in SK Hynix shares since the start of 2023, more than triple Samsung’s performance.

South Korea’s semiconductor exports in jumped 57.5% in the first 20 days of July, early trade data from customs office showed. Asia’s fourth-largest economy is one of the world’s largest exporters of computer chips and as such serves as a useful indicator of global technology demand. Chip shipments have picked up in recent months.

What Bloomberg Intelligence Says

Samsung’s strong profit rebound in 2Q, announced on July 5, could extend into 3Q due to memory chips. Its 2Q operating profit, which was 25% above the consensus estimate, implies that the average selling price for DRAM and NAND might have jumped, in line with peer Micron. As demand for memory chips could seasonally strengthen in 2H, Samsung’s profit may further rise.

- Masahiro Wakasugi, analyst

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