Samsung reported stellar Q2 results

On Wednesday, Samsung Electronics Co. announced an operating profit of 10.4 trillion won ($7.5 billion) for the second quarter, matching its preliminary estimates. This robust performance was driven by strong demand for its core memory chip products amid the ongoing AI surge.

Earlier this month, the South Korean tech giant projected its operating income for the April-June period to be 10.4 trillion won. This marks an impressive increase of over 15 times compared to the same period last year and a 58.1% rise from the previous quarter.

On Wednesday, Samsung Electronics Co. announced an operating profit of 10.4 trillion won ($7.5 billion) for the second quarter, matching its preliminary estimates. This robust performance was driven by strong demand for its core memory chip products amid the ongoing AI surge.

Samsung’s impressive increase

Samsung is the largest global producer of DRAM chips and the company has benefited significantly from the increase in price of DRAM and NAND flash memory chips, largely driven by the continuing demand for generative AI.

The company added that demand for DDR5 and high-density SSDs also remained strong, noting that the anticipated “continuous increase in the supply of AI servers and subsequent expansion of associated cloud services” would further boost demand for HBM in addition to conventional servers and storage solutions.

Earlier this month, the South Korean tech giant projected its operating income for the April-June period to be 10.4 trillion won. This marks an impressive increase of over 15 times compared to the same period last year and a 58.1% rise from the previous quarter.

Notably, the second-quarter profit surpassed Samsung’s entire operating profit for 2023, which was 6.57 trillion won.
For the cited quarter, Samsung Electronics reported a 23.4% year-over-year increase in sales, reaching 74.1 trillion won, aligning with the company’s guidance as disclosed in its regulatory filing this morning.

Following the earnings announcement, Samsung’s shares opened higher and were up 0.7% at 81,600 won in early Wednesday trading.
Samsung Electronics credited its impressive results to a rebound in the memory chip market, fueled by robust demand for high-end memory products essential for running generative AI applications and general servers.

Robust demand for advanced memory chips

The surge in semiconductor prices, driven by the AI boom, significantly boosted Samsung's earnings for the June quarter, benefiting from a low comparison base from the previous year. As a result, Samsung's share price increased by 0.9% in morning trading, outpacing the 0.5% rise in the benchmark index (.KS11).

Samsung reported an operating profit of 10.4 trillion won ($7.52 billion) for the April-June period, a substantial rise from the 670 billion won recorded a year earlier.

The surge in demand for high-end DRAM chips, including high bandwidth memory (HBM) used in AI chipsets and data center servers, has driven up chip prices. Samsung reported that its HBM revenue for the second quarter increased by approximately 50% from the previous quarter.
Additionally, South Korean competitor SK Hynix (000660.KS) projected continued strong demand for AI chips, following its announcement of the highest quarterly profit since 2018 last week.

“After Nvidia and global chip makers announced an AI semiconductor roadmap recently, we foresee a memory price hike trend until 1H25. We attribute this to greater concerns about memory supply amid robust demand for HBM and high density enterprise SSD, which use more wafers, with increased production lead time,” SK Kim of Daiwa Capital Markets said in a report last month.

Weaker smartphone demand

Samsung has recently reported weaker-than-expected demand for its smartphones, highlighting a shift in the market landscape. Despite being a leader in the industry, the company faces challenges as global economic uncertainties and market saturation impact consumer spending. The slowdown in smartphone upgrades and increased competition from budget-friendly brands contribute to the declining demand. Additionally, supply chain disruptions and higher production costs are affecting Samsung’s ability to maintain profit margins.

Smartphone sales fell in the second quarter, largely due to the high sales figures from new model launches in the first quarter. Despite this, Samsung reported robust demand for its Galaxy S24 series.
The company noted that overall smartphone demand decreased sequentially during the traditionally slower season, with a particular decline in the premium segment. However, Samsung anticipates growth in the premium segment in the second half of the year, although it expects a slowdown in the mass-market segment. Additionally, profitability in the smartphone sector declined as the costs of key components increased.

“Even in challenging circumstances, we will continue investing in upgrading Galaxy AI functionality in order to secure a long term sustainable growth engine,” Samsung said on Wednesday.

To address these challenges, Samsung is focusing on innovation and diversification, aiming to capture new segments of the market. The company is investing in advanced technologies such as foldable screens and 5G capabilities to differentiate its products. By enhancing its product offerings and exploring new markets, Samsung hopes to rejuvenate consumer interest and bolster its position in the competitive smartphone industry.

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