Samsung's profits skyrocket as chip price rises on strong AI demand

Samsung Electronics reported a sharp rise in its second-quarter operating profit Friday, attributing this to the recovery of semiconductor prices buoyed by the boom in the field of artificial intelligence. The company estimated that its operating profit for the quarter ended June 30 sharply rose over 15 times, reaching 10.4 trillion won ($7.54 billion) vis-a-vis 670 billion won last year.

That outperformed the 8.8 trillion won consensus estimate from LSEG SmartEstimate, which is a weighted average of the most reliable analysts' projections. It was the most profitable quarter for the company since the third quarter of 2022.

The revenue probably surged about 23 per cent year-on-year to 74 trillion won during the quarter, Samsung said.

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The semiconductor business, its crown jewel and the biggest contributor to its overall performance, likely posted a second consecutive quarterly profit. That would be an improvement from the first quarter, as analysts expect memory chip prices to continue their rebound from a slump extended from mid-2022 to the last half of 2023, hit by soft post-pandemic demand for gadgets using these chips.

Analysts also pointed out that increased demand for high-end DRAM chips, especially for high-bandwidth memory (HCM) chips used in artificial intelligence (AI) chipsets, and chips used in data centre servers and AI-powered gadgets, has been causing the rise in prices for the chips.

For instance, DRAM chip prices in the second quarter have risen 13-18 per cent compared with the previous quarter, according to TrendForce. Meanwhile, NAND Flash chips, used for data storage functions, saw price increases of 15-20 per cent in the second quarter.

This is, of course, driven by demand for artificial intelligence technologies that are greatly in demand and positions Samsung well within the global market for semiconductors.