Samsung Electronics Co. has reported its fastest sales and profit growth in years, driven by a recovery in memory chip demand and the accelerating global development of AI. The world’s largest producer of memory chips and smartphones announced a 15-fold increase in operating profit, reaching 10.4 trillion won ($7.5 billion) in the June quarter. This impressive performance exceeded analysts’ expectations. Sales also grew by approximately 23%, marking the largest rise since the Covid-era peaks in 2021. Consequently, Samsung’s stock surged 3%, hitting its highest level since January 2021.
The results highlight a significant rebound in the $160 billion memory market, which is recovering from a severe downturn following the Covid-19 pandemic. This resurgence has been fueled by a boom in data centers and AI development. CLSA estimates that the average memory chip prices rose by 15% from the previous quarter, helping Samsung’s largest division to reverse last year’s losses.
Samsung’s depositary receipts in London climbed roughly 4% at 9:45 a.m. New York time. This gain ignited a broader rally across the chip sector, benefiting companies such as Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc.
Both DRAM and NAND prices were bolstered by demand for AI servers and enterprise data storage, reversing inventory valuation losses, according to Sanjeev Rana, an analyst at CLSA Securities Korea. Samsung’s foundry operations also saw a boost from improved IT demand.
South Korea’s government announced that the country exported the most semiconductors on record in June, driving its trade surplus to $8 billion, the largest since 2020. Samsung is set to announce final earnings with divisional breakdowns on July 31.
While Samsung benefits from the broader industry recovery, there are concerns about its market position in AI chips compared to SK Hynix Inc. SK Hynix, the leading supplier of high-bandwidth memory (HBM) chips crucial for AI hardware, has seen its shares rally by about 60% since the start of 2024, compared to an 8% gain for Samsung’s stock.
Samsung is also facing internal challenges, with union organizers planning a three-day walkout among its 28,000-plus members, including at key chip plants, over a pay dispute. The proposed action follows a small-scale strike last month, the first in the company’s 55-year history. The extent of participation in Monday’s walkout remains unclear.
Long-term, Samsung aims to expand its business in AI memory while managing fears of oversupply. In May, the company unexpectedly appointed Jun Young Hyun, a memory chip veteran, as the new leader of its most important business line, replacing Kyung Kye-hyun.
In previous quarters, robust sales of Samsung’s smartphones helped offset sluggish chip demand. South Korea’s largest company is holding a Galaxy Unpacked event in Paris next week to sustain momentum for its phones.
For more detailed insights, read the full article on Bloomberg.