Samsung Electronics anticipates tenfold profit surge in Q1 amid chip market rebound

Samsung Electronics predicted a more than tenfold increase in its operating profit for the the January-March period, signaling a dramatic resurgence in its semiconductor business on rebounding demand for memory chips.

Samsung’s first-quarter operating profit is estimated to hit 6.6 trillion won ($4.89 billion), up 931.3 percent from a year ago, according to its earnings guidance. The amount surpassed the consensus of 5.26 trillion won predicted by local analysts, as provided by the market intelligence firm FnGuide.

Sales for the January-March period are predicted to mark 71 trillion won, up 11.4 percent from a year ago. The sales estimate was, however, lower than the consensus of 72.6 trillion won projected by FnGuide.

If the expected figure meets its actual performance, it will mark the first time Samsung’s quarterly revenue has topped the 70 trillion won mark since the fourth quarter of 2022. Samsung did not provide an estimate for net income.

While Samsung did not release detailed performances of its key business units for Friday’s earnings guidance, market watchers expect its Device Solutions division, which oversees the chip business, will swing to a profit for the first time in five quarters by recording as high as 1 trillion won.

As the prices of DRAM and NAND flash rose due to the company’s production cut efforts, its memory business seems to have led the DS division to a surplus by generating trillions of operating profit as a result of focusing on sales of high value-added products, the market watchers explained.

During a fourth-quarter earnings conference call in January, Kim Jae-june, executive vice president in charge of memory marketing strategy hinted that Samsung’s memory business was expected to swing to a profit in the January-March period as it intends to focus on “improving profitability by actively responding to the demand for HBM and solid-state drive (SSD) related to generative AI.”

Samsung’s mobile business also appears to have improved profitability with increased smartphone shipments, including strong global sales of its latest flagship smartphone series -- the Galaxy S24.

Market watchers further predict that Samsung’s performance improvement will likely continue for a while in line with the upward trend in memory chip prices.

According to a recent report released by Taiwanese market researcher TrendForce, DRAM contract prices for the second quarter are projected to see a modest increase of 3 to 8 percent, in addition to a 20 percent rise in the product’s average sales price in the first quarter. NAND flash contract prices are also expected to see a strong increase of 13 to 18 percent in the April-June period, following a 23-28 percent increase in the first quarter.

Additionally, Samsung seeks to mass-produce HBM3E 12H, the industry’s first 12-stack HBM3E DRAM and the highest-capacity High Bandwidth Memory product to date, in the first half of this year and increase HBM shipments this year by up to 2.9 times compared to last year.

“Samsung Electronics' memory chip operating profit in the first quarter is likely to turn a profit for the first time in six quarters, and shipments of 8-stack HBM3E will likely begin in the second half, alleviating concerns about its HBM's competitiveness,” said Park Ju-young, an analyst at KB Securities.

“(Samsung’s) foundry business is also expected to turn profitable within this year due to an increase in its factory operating rate for advanced chipmaking process.”

The world's largest memory chip and smartphone maker will release a detailed first-quarter earnings report on April 30.