The Samsung logo is seen at their booth during the Mobile World Congress in Barcelona, Spain on February 28, 2024. (Photo by Joan Cros/NurPhoto via Getty Images)
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Samsung Electronics on Wednesday reported higher-than-expected revenue for the second quarter and operational gains, as demand for advanced memory chips critical to artificial intelligence training remained strong.
Here are Samsung’s second-quarter results vs. average analyst estimates according to LSEG.
- Income: 74.07 trillion Korean won (about $53.45 billion) vs. 73.74 trillion Korean won
- Operating profit: 10.44 trillion Korean won vs. 9.53 trillion Korean won
Samsung’s revenue for the quarter ended in June rose 23.42 percent from a year earlier, while operating profit rose 1,458.2 percent.
The South Korean giant said strong demand for high-bandwidth as well as conventional memory, such as regular dynamic random access memory, from customers expanding investments in artificial intelligence contributed to the strong performance.
For the second half, Samsung said it expects demand from server AI to remain strong in server products, including HBM, server DRAM and SSDs. SDD or Solid State Drive refers to a semiconductor-based storage device.
The company added that expanding capacity to meet demand for HBM and server DRAM could further limit conventional memory supply potato chips.
During its earnings call, the company said it plans to address AI demand by expanding sales of HBM3E — its latest AI memory product — through capacity expansion in the second half.
It will also expand sales of SSDs, which are currently in high demand for AI servers as well.
The company also said it will pay a dividend of 361 won per common and preferred share for the second quarter.
“Under our current dividend policy, the total amount distributed per quarter is approximately 2.45 trillion. won, which will be paid near the end of August.”
Samsung shares rose as much as 1.35% on Wednesday morning.
Memory rush
HBM memory chips are vital for AI chips – which have seen a huge demand fueled by the AI boom. This has greatly benefited companies such as Samsung Electronics and SK Hynix, the world’s two leading memory chip makers.
“With average memory selling prices expected to continue their upward trend for the next several quarters, we forecast quarterly sequential earnings growth for Samsung Electronics through 2025,” CLSA said in a report earlier this month after Samsung forecast for the second quarter.
Business for the world’s largest memory chip maker rebounded as Memory chip prices rebounded on AI optimism last year. The South Korean electronics giant posted record losses in 2023 as the industry was dragged down by a post-Covid slump in demand for memory chips and electronics.
“After Nvidia and global chipmakers recently announced an AI roadmap for semiconductors, we forecast an upward trend in memory price through 1H 2025. We attribute this to greater memory supply concerns amid strong demand for HBM and high-density enterprise SSDs, which use more wafers, have increased production lead time,” Daiwa Capital Markets’ SK Kim said in a report last month.
Samsung has reportedly cleared the tests for using its HBM3 chips in Nvidia processors for the Chinese market. SK Hynix has so far led the market for HBM memory chips, having been the sole supplier of HBM3 chips to Nvidia.
SK Hynix on Thursday posted its highest quarterly profit since the second quarter of 2018, recovering from a loss of 2.88 trillion won in the same period a year ago.
Weaker smartphone demand
Smartphone sales fell in the second quarter mainly due to the “base effect of new model launches” in the first quarter. However, the Galaxy S24 series continued to be in high demand, Samsung said.
“Demand for smartphones declined sequentially in the seasonally weak quarter, particularly in the premium segment,” the company said, adding that it expects the premium segment to grow in the second half, although the mass segment will likely experience a slowdown.
Profitability in the smartphone business also declined as prices of key components rose.
The company plans to continue promoting Galaxy AI premium products. In its latest move, Samsung announced last week global availability for the latest Galaxy devices including Galaxy Z Fold6, Z Flip6, Watch Ultra and Ring.
“Even in difficult circumstances, we will continue to invest in upgrading the functionality of Galaxy AI in order to ensure a long-term sustainable growth engine,” Samsung said on Wednesday.
Counterpoint Research said Samsung should see a “further uptick in its operating performance” in the second half, mainly due to its memory chips and smartphone “premiumization” trend.
“SK Hynix and Micron will however continue to challenge Samsung in memory both in the AI segment with HBM development and in the AI smartphone and PC market, as well as close relationships and optimizations with key PC players such as Qualcomm, Intel and Nvidia. Neil Shah, vice president of research at Counterpoint Research, said in emailed comments to CNBC.