Samsung Electronics reported its fastest pace of net income growth since 2010 after the artificial intelligence boom lifted earnings at its semiconductor division.
The world’s largest maker of memory and smartphones posted a six-fold surge in net income to 9.64 trillion won (US$6.96 billion) in the June quarter, versus the average analysts’ projection for 7.97 trillion won. Samsung earlier this month reported a 15-fold rise in preliminary operating profit and a 23 per cent rise in revenue, the biggest gain in sales since 2021.
The beat suggests the global computing markets are emerging from a protracted post-Covid downturn, thanks in part to a wave of spending on AI development from the US to China. Like SK Hynix, Samsung supplies the semiconductors used for storage in servers and mobile devices and also sells a plethora of consumer electronics.
“Samsung’s memory business has fully turned around and is back to business,” said Tom Kang, director at Counterpoint Research. High demand for server-related products led to the surprise profit, he said. The Galaxy S24’s performance also bolstered earnings beyond the smartphone division by lifting sales of camera sensors, chips, displays and display drivers, he said.
Samsung’s pivotal semiconductor unit posted a better-than-expected 6.45 trillion won operating profit, its second consecutive quarter in the black after four successive losses. It was boosted by rising memory prices and robust demand for high-bandwidth memory chips, or HBMs, which help conserve power while supporting faster processing speeds required by AI.
Investors have been concerned about Samsung’s market position in the fast-growing HBM market. Shares of Korea’s largest company have underperformed its smaller rival SK Hynix, now the leading supplier of HBMs. It has struggled to get its latest chips certified by Nvidia, which has become the world’s most valuable chip maker thanks to insatiable demand for AI accelerators.
But Samsung is finally beginning to make progress in narrowing the gap with SK Hynix. It has won the long-awaited approval from Nvidia for a version of its HBM chips called HBM3, and it also anticipates approval for the next generation, HBM3E, in two to four months, Bloomberg News reported this week.
The company said it plans to “actively respond” to demand for high-value-added products for AI and will expand capacity to increase the portion of HBM3E sales in the second half of this year.
Both DRAM and NAND prices increased during the quarter, helping operating income grow at Samsung’s foundry, or contract chipmaking, business. That unit is expected to rebound in the second half of the year on growth in demand for AI and high-performance computing, the company said.
SK Hynix has been one of the main beneficiaries of a race to supply components essential to creating ChatGPT-like generative AI services. Revenue from HBM, which are paired with Nvidia’s accelerators, surged more than 250 per cent in the June quarter.
Samsung is prioritising production of HBM and server memory, which means “supply of cutting-edge products for PC and mobile is expected to be constrained”, the company said in a statement.
South Korea’s semiconductor exports jumped 57.5 per cent in the first 20 days of July, early trade data from customs office showed. Asia’s fourth-largest economy is one of the world’s largest exporters of computer chips and as such serves as a useful indicator of global technology demand. Chip shipments have picked up in recent months.
