Samsung Electronics Co. has achieved its fastest sales and profit growth in years, driven by a resurgence in memory chip demand as AI development accelerates globally. The company, the world’s largest maker of memory chips and smartphones, reported a remarkable 15-fold increase in operating profit, reaching 10.4 trillion won ($7.5 billion) in the June quarter. This impressive performance surpassed analysts’ expectations, with sales growing around 23%, marking the biggest rise since the Covid-era highs in 2021. Consequently, Samsung’s stock climbed 3% to its highest level since January 2021.
The $160 billion memory market is rebounding strongly this year from a severe post-Covid downturn, fueled by a boom in data centers and AI development. The increased demand drove average memory chip prices up by 15% from the previous quarter, according to CLSA estimates. This surge helped Samsung’s largest division reverse the losses it faced last year. The company’s depositary receipts in London saw a 4% increase by 9:45 a.m. New York time, sparking a broader rally across the chip sector. Notable companies such as Infineon Technologies AG, STMicroelectronics NV, ASML Holding NV, and Arm Holdings Plc also saw their stocks rise.
Both DRAM and NAND prices were bolstered by demand for AI servers and enterprise data storage, aiding in reversing inventory valuation losses, said Sanjeev Rana, an analyst at CLSA Securities Korea. Additionally, Samsung’s foundry operations experienced a boost from improved IT demand. South Korea’s government reported a record high in semiconductor exports in June, driving the country’s trade surplus to $8 billion, the largest since 2020.
Despite the overall positive performance, concerns remain about Samsung’s position in the emerging AI chip market compared to its rival SK Hynix Inc. SK Hynix, now the leading supplier of high-bandwidth memory (HBMs), a crucial component for AI hardware, has outperformed Samsung. Samsung has faced challenges in getting its latest HBM chips certified by Nvidia Corp., the world’s most valuable chipmaker, due to the high demand for AI accelerators.
Samsung is also dealing with potential labor unrest as union organizers plan a three-day walkout involving over 28,000 members, including key chip plant workers, over a pay dispute. This action follows a smaller strike last month, marking the first in the company’s 55-year history. It remains unclear how many employees will participate in the upcoming walkout.
Looking ahead, Samsung aims to expand its AI memory business while managing concerns about oversupply. The company recently appointed Jun Young Hyun, a veteran in memory chips, as the new leader of its most critical business line, replacing Kyung Kye-hyun. Solid sales of Samsung’s smartphones have previously helped mitigate sluggish chip demand. The company is set to hold a Galaxy Unpacked event in Paris next week to maintain the momentum for its phones.
For more details, read the full article on Bloomberg.