Samsung Reports Significant Financial Growth Amid AI Demand Surge
Seoul, South Korea - In the second quarter of 2024, Samsung Electronics experienced remarkable financial growth, posting a 15-fold increase in operating profit, reaching 10.4 trillion won ($7.5 billion). This considerable rise outperformed analysts' projections, driven primarily by a recovery in memory chip demand, which surged due to the global acceleration in AI development.
Sales for the quarter grew by approximately 23%, marking the highest increase since the COVID-19 peak in 2021. As a result, Samsung's stock ascended by as much as 2.3%, reaching its highest level since January 2021.
This improvement reflects the rebounding $160 billion memory market, which experienced severe downturns post-COVID-19. A substantial boom in data centers and AI development has driven this recovery, elevating average memory chip prices by 15% from the previous quarter, according to CLSA estimates.
Both DRAM and NAND memory chip prices were bolstered by the surge in demand for AI servers and enterprise data storage, reversing inventory valuation losses. Improved IT demand also positively impacted Samsung’s foundry operations. The South Korean government reported record semiconductor exports in June, resulting in an $8 billion trade surplus, the highest since 2020.
Despite these gains, Samsung faces challenges in the AI chip market against competitor SK Hynix Inc., which leads in supplying high-bandwidth memory (HBM) for AI hardware. Samsung has struggled with certifying its latest HBM chips with Nvidia Corp., delaying its entry into this lucrative market segment.
Samsung recently appointed Jun Young Hyun, a memory chip veteran, to lead its crucial business line in an effort to enhance its competitive standing. The company aims to expand its presence in AI memory while managing supply concerns.
Additionally, Samsung is bracing for a potential three-day walkout by union organizers over pay disputes, which could involve over 28,000 employees, including those at key chip plants.
Final earnings, detailing divisional performances, are expected to be announced on July 31.