The world’s biggest maker of memory chips, Samsung Electronics, is likely to post a nine-fold increase in profits for the first quarter of the year, on the back of a sharp revival in the semiconductor market.
Analysts estimate* the Korean chip and electronics maker will report an operating profit of 5.7 trillion won ($4.24 billion) in the quarter ended March 31.
If so, it would be Samsung’s highest profit since the third quarter of 2022. That compares with an operating profit of 640 billion won in the first quarter last year.
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The tech giant will announce its preliminary first-quarter earnings results on Friday before reporting full figures later this month.
The key driver of the profit growth would be Samsung’s chip division, which is expected to report its first quarterly profit in five quarters, analysts say. The division is expected to report profits of about 750 billion won.
Samsung’s Korea-listed shares were up nearly 1.5% on Thursday.
Chip revival
Memory chips are traditionally Samsung’s biggest earners, but their prices were in a deep trough since mid-2022. The market was hit by a weak post-pandemic demand for gadgets that use the chips.
Prices for those chips are now rebounding, however.
During the first quarter, memory chip prices jumped by about 20% versus the previous quarter for DRAM chips used in tech devices. The increase was 23% to 28% for NAND Flash chips used for data storage, according to data provider TrendForce.
Furthermore, memory chipmakers have a limited supply of lower-margin chipsets since the downturn began, and buyers are now restocking inventory. Analysts say that is likely improving Samsung’s profits.
The company’s chip design and chip contract manufacturing businesses are still loss-making, analysts said.
But the bullish outlook for memory chip demand, including exploding appetite for chips such as high-bandwidth memory (HBM) used in artificial intelligence chipsets, has driven a 29% rise in Samsung shares over the last 12 months.
Smartphone sales grow
Samsung’s mobile business also likely reported an operating profit of around 3.8 trillion won, analysts estimated. But that would be slightly below the unit’s 3.94 trillion won profit a year ago.
Samsung began selling its latest flagship Galaxy S24 smartphones at the end of January, with a range of AI functions to compete with rival Apple.
This led Samsung to ship an estimated 57 million smartphones during the first quarter, up 8% from the previous quarter according to Korean investment firm Eugene Investment & Securities.
The average selling price of Samsung smartphones also likely rose 30% to $340 quarter-on-quarter, supporting profits, Eugene said.
* Estimates are according to the average of an LSEG SmartEstimate from 27 analysts, weighted toward those who are more consistently accurate.
- Reuters, with additional editing by Vishakha Saxena
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