Samsung Electronics is set to experience a monumental surge in profits, driven by the booming demand for artificial intelligence (AI) chips.
The South Korean tech giant anticipates a 15-fold increase in its second-quarter operating profit, marking a significant turnaround from last year's slump.
Key Takeaways
- Samsung expects a 15-fold increase in second-quarter operating profit.
- The surge is driven by high demand for AI chips and memory products.
- The company's chip division is the primary contributor to the profit boost.
- Samsung's shares have risen in response to the positive forecast.
Profit Surge Driven by AI Boom
Samsung Electronics has projected a staggering 1,452% increase in its second-quarter operating profit, reaching 10.4 trillion won ($7.5 billion). This surge is primarily attributed to the rising prices of memory chips, particularly those used in AI applications. The company's revenue is also expected to grow by 23% to 74 trillion won.
Strong Performance in Chip Division
The chip division has been the cornerstone of Samsung's recent financial success. Analysts estimate that this division alone contributed up to 5 trillion won in operating profit for the second quarter. The demand for high-bandwidth memory (HBM) and NAND flash memory chips has been particularly strong, driven by the needs of data centres and AI development.
Impact on Samsung's Stock
The positive earnings forecast has had a favourable impact on Samsung's stock, which gained 1.4% in early trading. However, the company's shares have underperformed compared to its domestic rival, SK Hynix, which has seen a 62.5% rally this year.
Challenges and Future Prospects
Despite the strong performance, Samsung faces several challenges. The company's HBM chips have yet to pass Nvidia's qualification tests, and there are concerns about its competitiveness in the advanced chip market. Additionally, Samsung's labour union is threatening a three-day strike, demanding higher wages and more holidays.
Upcoming Product Launches
Samsung plans to launch its latest foldable phones with AI features next week in Paris. These new products are expected to further boost the company's earnings, despite the rising material and marketing costs in its smartphone division.
Conclusion
Samsung's anticipated profit surge underscores the growing importance of AI technology in driving demand for advanced memory chips. While the company faces challenges in maintaining its competitive edge, the strong performance of its chip division and upcoming product launches offer a promising outlook for the future.
Sources
- Samsung expects profits to surge on demand for AI chips, Financial Times.
- Samsung expects profits to soar with boost from AI, BBC.
- AI chip demand fuels Samsung profit surge - World Business Watch News, WION.
- AI Chip demand fuels Samsung profit surge - World News, WION.
- Samsung projects 15-fold profit surge in second-quarter as chip prices rise | ZDNET, ZDNet.
