The Tamesis
South Korean semiconductor giant Samsung Electronics estimated on Tuesday that its first-quarter profit surged 755% year-on-year to a record high of 57.2 trillion won ($37.9 billion), driven by strong sales of chips critical for artificial intelligence.
The South Korean government has pledged to become one of the world’s top three artificial intelligence powers, alongside the United States and China.
Samsung, along with South Korean company SK Hynix, has become a key player in supplying high-performance chips needed by companies racing to keep pace with the fast-growing artificial intelligence industry.
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The company also said in a regulatory filing that its sales are expected to reach 133 trillion won ($88 billion) in the three months to the end of March, up 68% from the same period last year.
Although the global semiconductor supply chain will face risks if the war in the Middle East continues, the outlook remains strong.
A lawmaker from South Korea’s ruling party told reporters last month that officials at Samsung and other companies were concerned that chip production could be disrupted if some key supply chain materials, such as helium, could not be sourced from the Middle East.
“Samsung Electronics achieved its highest-ever performance, driven by growing revenue and profit in the memory-centric Device Solutions (DS) segment,” a Samsung spokesperson said.
He said the company’s competitiveness in home appliances and smartphones has helped boost earnings.
South Korea’s Yonhap news agency quoted its own data company as saying that operating profit increased more than eight times from 6.69 trillion won in the same period last year and was 36.7% higher than the average estimate.
‘Even better numbers’ possible
Samsung is expected to see “better results” in the coming months as demand for memory chips continues to grow, Daishin Securities analyst Ryu Hyung-keun told AFP.
“As we see memory chip prices surge, margins will improve further over the rest of the year,” he said.
But Kim Dae-jong, a business professor at Sejong University, said the company is facing risks.
“Union strikes scheduled for next month and the war in Iran are affecting the outlook,” he told AFP.
“The Middle East is a major market for Samsung home appliances, and demand in the region is high and worrying.”
At the same time, LG Electronics, South Korea’s second-largest home appliance manufacturer after Samsung, also expects first-quarter revenue to reach a record 23.73 trillion won.
“Despite continued macroeconomic uncertainty, the company’s core businesses, including home appliances, have maintained growth with strong product competitiveness and solid market position,” the company said in a statement.
Memory chip revenue surges
Samsung has received large orders for high-bandwidth memory (HBM) chips from major technology companies. HBM is a chip used in data centers that is considered an AI “accelerator” and can be used to perform more demanding tasks and calculations.
It also drives up the cost of less flashy chips used in consumer electronics and threatens to raise prices for phones, laptops and other devices around the world.
Riding on the artificial intelligence boom, Samsung’s stock price has risen more than 240% in the past year.
Samsung did not provide a breakdown of earnings for its separate units, such as its chip and mobile divisions.
TrendForce, a Taipei-based research firm, predicts that memory chip industry revenue will soar to a global peak of more than $840 billion in 2027.
Samsung has earmarked billions of dollars to expand chip production facilities and pledged to continue spending to “shift to advanced manufacturing processes and upgrade existing production lines to meet growing demand.”
Experts say the move will help Samsung seize the moment amid fierce competition for chips critical to artificial intelligence infrastructure.
Samsung is expected to announce its final quarterly earnings report at the end of April. The company’s shares rose 0.73% in afternoon trading in Seoul.
- Vishakha Saxena Additional Editor AFP
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