Samsung Electronics expects first-quarter earnings to beat market expectations as memory chip prices and sales recover, signaling an industry turnaround and fueling optimism for the tech giant’s performance outlook for the year. Operating profit for the first quarter surged 931% year-on-year, according to the company’s earnings guidance on April 5. This growth was partly driven by the January launch of its AI-powered smartphone, the Galaxy S24.
Samsung Electronics announced that operating profits in the three months to March jumped 931% from a year ago to $4.9 billion (6.6 trillion won), surpassing the initial market consensus of approximately 5.2 trillion won.
Sales increased 11.37% to 71 trillion won during the same period, slightly falling short of the market’s 72 trillion won forecast.
While Samsung Electronics did not disclose detailed performance results by division, analysts estimate that the company’s semiconductor business, the Device Solution (DS) division, posted an operating profit of over 1.2 trillion won. This marks a return to profitability for the first time in five quarters since the fourth quarter of 2022. Analysts say the rebound in memory chip prices, driven by production cuts, is a major factor that boosted the division’s performance.
Sales of high-end memory chips such as DDR5 and high-bandwidth memory (HBM) increased significantly, according to the company. Samsung also raised the price of NAND flash chips by 30% in the first quarter, which were sold at near-cost levels last year, a move that helped restore profitability.
The company’s contract chip manufacturing business, the foundry division, and the system LSI division will likely have reported a loss for the first quarter. But analysts expect that both divisions have narrowed their losses compared to the fourth quarter of last year.
“DRAM and NAND flash prices rose 15% and 27%, respectively, and the foundry business is expected to have narrowed its losses by 30% quarter-on-quarter after utilization rates bottomed out the first quarter,” said Kim Dong-won, head of research at KB Securities.
The launch of Samsung’s first AI smartphone boosted the company’s smartphone business, with first-quarter shipments amounting to 60 million units and generating an operating profit of nearly 4 trillion won. “The Galaxy S24 sold more units than its predecessor, the S23, thanks to its unique AI features,” said Hyundai Motor Securities analyst Noh Geun-chang.
The display division’s performance deteriorated as demand for smartphone OLED screens fell in the first quarter. This downturn was caused by a decrease in Apple’s first-quarter iPhone shipments and inventory adjustments. “The display business’ operating profit is expected to decrease due to lower orders from Samsung’s major customer, Apple, despite increased panel production for the Galaxy S24,” said Lee Eui Jin, analyst at Heungkuk Securities.
Analysts expect the company’s earnings growth to gain momentum in the second half of this year. With Big Tech companies pouring investment into data centers, sales of DRAM chips for servers, a key revenue stream for the DRAM business, is forecast to grow. Next-generation HBM chips used in AI chips, the HBM3E, are also poised to benefit from the generative AI boom. As the memory chip sector enters its upcycle, the average selling prices (ASPs) of DRAM and NAND chips are also projected to rise.
“Samsung will start supplying Mach 1 AI chips to data centers in the second half of this year, and Hyundai Motor Group is expected to order high-performance AI chips for software-driven vehicles (SDVs),” said KB Securities research head Kim Dong-won.
