Samsung Electronics Co. Galaxy S24 smartphones throughout a media preview occasion in Seoul, South Korea, on Monday, Jan. 15, 2024. Samsung, the world’s most prolific smartphone maker, is leaning into synthetic intelligence as the important thing to unlocking higher gross sales this 12 months. Photographer: SeongJoon Cho/Bloomberg through Getty Pictures
SeongJoon Cho | Bloomberg | Getty Pictures
Samsung Electronics on Tuesday stated working revenue for the primary quarter jumped 932.8% as reminiscence chip costs rebounded on the again of AI optimism.
Listed below are Samsung’s first-quarter outcomes versus LSEG estimates:
- Income: 71.92 trillion Korean gained (about $52.3 billion), vs. 71.04 trillion Korean gained
- Working revenue: 6.61 trillion Korean gained, vs. 5.94 trillion Korean gained
Samsung’s income for the quarter ending March jumped 12.81% from a 12 months in the past, whereas working revenue soared 932.8% in the identical interval.
The figures have been in step with the corporate’s steering earlier this month, the place Samsung stated working revenue within the January-March quarter doubtless rose to six.6 trillion Korean gained, up 931% from a 12 months in the past. The agency anticipated first quarter income at 71 trillion gained.
The South Korean electronics large noticed report losses in 2023 because the trade reeled from a post-Covid stoop in demand.
“The corporate posted KRW 71.92 trillion in consolidated income on the again of robust gross sales of flagship Galaxy S24 smartphones and better costs for reminiscence semiconductors. Working revenue elevated to KRW 6.61 trillion because the Reminiscence Enterprise returned to revenue by addressing demand for top value-added merchandise,” Samsung Electronics stated in a assertion on Tuesday.
Citi analysts stated they see upside for Samsung’s NAND flash reminiscence enterprise because of AI computing demand. In a be aware on April 5, they reiterated their “purchase” score on the agency with a goal value of 120,000 gained — a 56% upside from the closing value of 76,700 gained on Monday.
NAND is one other staple reminiscence chip alongside DRAM.
“We count on storage (HDD) to be the subsequent bottleneck in AI computing, particularly in AI coaching, and foresee Samsung Electronics to be one of many key beneficiaries of SSD demand momentum for AI coaching,” stated the Citi analysts.
Samsung is the world’s largest producer of dynamic random-access reminiscence chips (DRAM), that are generally present in a variety of client gadgets together with smartphones and computer systems.
Samsung stated it expects the second quarter to be pushed principally by demand for generative AI, whereas cellular demand stays secure. In the meantime, it expects PC demand to be impacted by gradual seasonality, which might result in clients adjusting inventories earlier than new product launches within the second half of 2024.
In a Tuesday earnings name, the agency warned of escalating geopolitical instability and continued value hikes in main parts, significantly reminiscence.
“Profitability in Q2 is anticipated to be down barely in comparison with Q1 and Q3, which is once we launched new flagship merchandise this 12 months. In response, we’re specializing in value competitiveness all through the R&D, manufacturing and gross sales processes to realize stable profitability,” stated Samsung, including that it’s going to proceed to spice up flagship gross sales via enlargement of Galaxy AI.
Reminiscence enterprise returns to revenue
Samsung stated its semiconductor enterprise logged a 1.91 trillion Korean gained in working revenue within the first quarter, as in comparison with a lack of 4.58 trillion gained in the identical interval a 12 months in the past and a lack of 2.18 trillion Korean gained within the fourth quarter.
“We assume the earnings shock was pushed by greater reminiscence value hike on AI-driven robust upturn cycle. We anticipate the corporate will information for constructive reminiscence market outlook and emphasize its readiness in AI period together with HBM (12H HBM3E, HBM4) and foundry/packaging resolution,” stated SK Kim of Daiwa Capital Markets in emailed feedback to CNBC on Monday, forward of the earnings launch.
As AI fashions grow to be extra complicated and datasets grow to be bigger, these fashions want reminiscence chips with greater capacities and sooner speeds to cater to those workloads.
Kim stated in an April 5 report he expects one other value hike on reminiscence chips to drive Samsung’s second-quarter earnings on the again of an AI growth and the earthquake in Taiwan.
“Particularly, we count on extra upside in costs ensuing from the earthquake in Taiwan,” stated Kim, including that the earthquake in early April quickly impacted TSMC‘s and Micron‘s manufacturing.
To fulfill AI demand, Samsung stated it began mass producing HBM3E 8H and V9 NAND in April. It plans to mass produce HBM3E 12H merchandise and a 128GB product primarily based on 1b nanometer 32GB DDR5 throughout the second quarter.
Regardless of macroeconomic uncertainty and geopolitical tensions, the agency expects the operational atmosphere to “stay constructive with demand” – bolstered by generative AI – within the second half of the 12 months.
Samsung additionally stated improvement of 3-nanometer and 2-nanometer processes is “progressing easily.” Samsung kicked off mass manufacturing of 3-nanometer chips in 2022 and plans to start out mass producing 2-nanometer chips in 2025.
Galaxy S24 increase
Robust gross sales of Samsung’s newest smartphone sequence Galaxy S24 helped to elevate income and working revenue of the cellular enterprise, the agency stated. AI options on the S24 reminiscent of Circle to Search, Photograph Help and Reside Translate have been well-liked amongst clients, Samsung stated.
Nevertheless, the agency warned that smartphone demand and shipments might decline within the second quarter due to seasonality.
However the smartphone market might see a rebound within the second half of the 12 months from “stabilizing client sentiment, the enlargement of AI services, and financial development in rising markets.”
Samsung stated it’s going to proceed to broaden Galaxy AI to present and new flagship merchandise to drive additional development.
Rising competitors
Many nations on the planet are racing to fabricate superior semiconductors.
Earlier this month, the Biden administration agreed to grant Samsung as much as $6.4 billion of funding to create new manufacturing capability to supply chips in Texas. Micron and TSMC are additionally poised to obtain grants to spice up chipmaking within the U.S. after many years of chip manufacturing transferring to Asia.
Samsung and TSMC are set to face competitors from Japan’s Rapidus Company, which was lately granted $3.89 billion in extra subsidies from the Japanese authorities to mass produce 2-nanometer chips from 2027.
There are rising considerations that Samsung Electronics dangers dropping its main place to rivals like SK Hynix, the world’s no. 2 reminiscence chip maker.
SK Hynix on March 19 stated it grew to become the primary within the trade to mass produce HBM3E, the next-generation of excessive bandwidth reminiscence chips utilized in AI chipsets. SK Hynix is the first provider of HBM3 chips to Nvidia’s AI chipsets.
Mehdi Hosseini, senior tech {hardware} analyst of Susquehanna Worldwide Group, identified in early April that Samsung was once the market chief in reminiscence, smartphones and show improvements.
Now, Samsung is simply “benefiting from the cycle restoration,” he added.
Within the first quarter, Samsung managed to regain the highest spot in smartphone shipments after dropping the crown to Apple in 2023, in accordance with Worldwide Knowledge Corp.
