Samsung Reports Record Profit Boosted by AI Demand and Memory Price Hike

Samsung Electronics reported a significant increase of 932.8% in operating profit for Q1 as memory chip prices rebounded due to optimism around AI applications, the South Korean electronics giant said on Tuesday. This marks an impressive turnaround from last year’s record losses experienced by Samsung and other industry players after a slump caused by declining demand post-COVID pandemic restrictions.
Samsung’s revenue for Q1 jumped 12.81% compared to the previous year, while operating profit soared nearly one thousand times in the same period. These figures were consistent with preliminary results announced earlier this month, which showed a possible jump of approximately $6 billion in profits from a loss of around $4 billion last year during Q1 alone.
The company’s president and head accountant presented a breakdown revealing sales rose 9%, contributing greatly to the quarterly financial reports, according to Yonhap news agency on Tuesday morning (Korean time). Samsung attributed this growth primarily to robust demand for its flagship Galaxy S24 smartphones alongside higher memory chip prices.
The South Korean tech giant is a leading manufacturer of dynamic random-access memory chips, which are frequently integrated into numerous devices ranging from mobile phones and personal computers to servers used in data centers. As AI models become increasingly complex with larger datasets required for these workloads, there has been an increased demand for high capacity and faster speed memory chips that can cater to such requirements.
SK Kim of Daiwa Capital Markets expressed optimism regarding Samsung’s performance by predicting further price hikes on account of the rising trend in AI applications combined with the recent earthquake in Taiwan which temporarily affected TSMC’s and Micron’s production facilities, as reported earlier this week (April 4).
Citi analysts also highlighted an upside for Samsung’s NAND flash memory business caused by intensified demands emanating from AI computing activities. They reiterated their “buy” rating on the company with a target price of KRW120,000 (approximately USD 95), which represents about 56% more than its current closing share value as at Monday’s close in Korea.
The Biden administration recently agreed to provide Samsung up to $6.4 billion for the creation of new manufacturing facilities that will produce chips within Texas, following similar grants awarded by Washington DC to Micron and TSMC aimed at increasing chip production inside US borders after several decades of outsourcing these operations abroad in Asia.
Rapidus Corporation from Japan has also been granted an additional $3.89 billion subsidy for mass producing 2-nanometer chips beginning next year (from 2027). Samsung and TSMC will be facing tough competition, according to rising concerns regarding the risk of losing market dominance amid stiff competition presented by industry rival SK Hynix – a company which claimed an industry milestone by launching the production line for the High Bandwidth Memory chip variant known as ‘HBM3E’, primarily utilized in AI chipsets produced and sold via Nvidia.
As previously mentioned, Samsung was once recognized globally as a market leader across various tech-related innovations spanning memory chips, smartphones, and display screens. Nevertheless, the company’s recent financial results suggest that it is now only profiting from an industry recovery cycle instead of leading in these areas like before.
Samsung managed to reclaim its position atop global smartphone shipments during Q1 2023 after losing this crown to Apple for most parts of last year (2022). International Data Corporation provided evidence supporting Samsung’s comeback as the world’s largest mobile phone vendor.