Samsung Electronics reported a remarkable 750 percent increase in operating profit year-on-year for the first quarter, reaching a new all-time high, driven by robust sales of AI-centric chips. The company anticipates sustained robust demand for the next quarter, bolstered by the continuous need for these high-performance chips in the rapidly evolving AI sector.
Playing a critical role in the supply chain alongside SK hynix, Samsung has solidified its position as a major player in providing sought-after chips to meet the demands of companies striving to keep pace with the dynamic AI industry. This surge in performance coincides with South Korea’s commitment to establishing itself as one of the leading AI forces globally, aligning with the ambitions of the United States and China.
In its quarterly earnings report, Samsung attributed its record-breaking revenue and operating profit to advancements in AI technology and proactive market strategies. Operating profit stood at 57.2 trillion won ($38.4 billion), surpassing earlier projections for the quarter. Net profit of 47.1 trillion won exceeded analyst estimates, while sales peaked at 133.9 trillion won, marking a historic quarterly high.
Notably, the chips division outperformed expectations, registering a substantial profit increase to 53.7 trillion won, representing a significant portion of the unit’s overall earnings. Samsung’s memory arm achieved record sales by catering to the surging demand for AI applications, despite supply constraints, with industry-wide memory price hikes contributing to its success.
The company foresees a sustained uptick in memory demand in the upcoming quarter as the expansion of AI infrastructure remains on track. Addressing concerns about potential supply chain disruptions amid the Middle East conflict, Samsung’s CFO, Park Soon-cheol, assured normal operations in semiconductor production, citing secured logistics routes and diversified trading partners in key regions like the US and Japan.
Following these positive financial results, South Korea’s Kospi stock index surged above 6,700 points, setting a new record. Despite the strong performance, Samsung’s shares experienced a decline in morning trading. Over the past year, Samsung’s shares have surged approximately 300 percent, propelled by the AI wave driving South Korea’s economic growth and propelling the stock market to unprecedented heights.
With escalating demand for high-bandwidth memory chips from major tech players for data centers and AI accelerators, Samsung faces the challenge of rising costs for consumer electronics chips, potentially leading to increased prices for phones, laptops, and other devices worldwide. Moreover, the company faces risks from an impending strike in May by unionized workers seeking better pay and bonuses.
Amid these developments, Samsung is also entangled in a legal battle in the US over alleged patent violations related to foldable smartphone technology, concerning its Galaxy Z series devices. Meanwhile, SK hynix also reported a substantial nearly 400 percent surge in net profit to a record high in the first quarter.