Samsung Electronics, headquartered in Suwon, South Korea, is on the brink of announcing a remarkable 1,452% year-on-year increase in operating profit for the second quarter of 2024. This forecasted leap to 10.4 trillion won ($7.5 billion) far exceeds the market consensus of 8.3 trillion won, as compiled by market tracker FnGuide. The company's projected quarterly sales are also impressive, expected to reach 74 trillion won, marking a 23.3% increase from the previous year.
The primary driver behind this financial resurgence is the recovery of Samsung's semiconductor business. After facing significant losses in 2023 due to a post-Covid slump in demand, the tech giant's chip division has bounced back robustly. The rebound in memory chip prices, particularly for dynamic random-access memory (DRAM) and NAND flash memory, has played a crucial role in this turnaround. These memory chips are essential components in a wide array of consumer devices, including smartphones and computers, and their demand has surged due to the growing complexity of AI models and the need for larger datasets.
In addition to the recovery in chip prices, Samsung's success can be attributed to the robust sales of its flagship Galaxy S24 smartphones. The company's financial results for the first quarter of 2024 already showed a staggering 932.8% surge in operating profit, driven by the same factors. Analysts speculate that the second quarter will continue this positive trend, with the semiconductor division expected to sustain its performance due to ongoing demand for high-end DRAM chips, particularly high bandwidth memory (HBM) chips used in AI chipsets, and chips for data center servers and AI-driven devices.
Despite the positive outlook for the semiconductor division, Samsung's mobile business is projected to experience a decline in operating profit compared to the previous year. This dip is attributed to increased costs of components, elevated marketing expenses, and investments in AI services. Analysts foresee the mobile business reporting an operating profit of 2 trillion won, down from 3.04 trillion won a year ago. However, Samsung is gearing up to launch its latest flagship foldable phones and a health monitoring ring on July 10 in Paris, aiming to intensify its competition with rival Apple in the premium market segment.
The broader market context also plays a significant role in Samsung's anticipated profit surge. The Biden administration's recent agreement to provide Samsung with up to $6.4 billion in funding to create new manufacturing capacity in Texas is a testament to the strategic importance of the semiconductor industry. Additionally, the AI boom and the temporary production impact at TSMC and Micron due to an earthquake in Taiwan have further driven up memory chip prices, benefiting Samsung.
Despite facing growing competition from companies like SK Hynix and Japan's Rapidus Corporation, Samsung remains a dominant player in the semiconductor industry. SK Hynix, the world's second-largest memory chip maker, recently became the first company to mass-produce HBM3E chips, making it the primary supplier for Nvidia's AI chipsets. However, analysts remain optimistic about Samsung's ability to maintain its leadership position, particularly with its readiness for the AI era and its advancements in HBM and foundry/packaging solutions.
Samsung Electronics' anticipated profit surge underscores the company's resilience and strategic positioning in the ever-evolving tech landscape. As the demand for AI technologies continues to grow, Samsung's advancements in semiconductor technology are likely to keep it at the forefront of the industry.
