Samsung’s Profit Rebounds With Chip Division Improvement

(Bloomberg) -- Samsung Electronics Co.'s profit rebounded sharply in the first quarter of 2024, reflecting a turnaround in the company's pivotal semiconductor division and robust sales of Galaxy S24 smartphones.

The world's largest memory chipmaker on Friday reported preliminary operating profit of about 6.6 trillion won ($4.9 billion), compared with analyst estimates of 5.37 trillion won. The increase snapped a run of consecutive quarterly declines that began in the third quarter of 2022. 

Revenue rose to about 71 trillion won during the quarter, compared with projections for 71.8 trillion won. Shares slipped about 1% in early Seoul trading.

“Revenue came short of expectations,” said Tom Kang, director at Counterpoint Research. But the preliminary results signal that the business is back to normal, he said. “Chip production reduction was the right move and Samsung is now on its path to benefit from the AI trend in both semiconductors and smartphones.”

Samsung will announce full earnings with divisional breakdowns on April 30.

The results underscore how demand for memory chips that power modern electronics is starting to rebound after a severe downturn in the industry. South Korea's exports of chips increased 35.7% from a year earlier in March to $11.7 billion, the largest monthly sales total since March 2022. 

Stronger pricing for memory chips is helping too. Major DRAM producers increased prices by 7% to 10% on average in the first quarter as inventory levels normalized for products like smartphones and PCs, according to Akshara Bassi, a senior analyst at Counterpoint Research.

Kyung Kye-hyun, Samsung's chief executive officer in charge of its semiconductor business, said at the company's annual shareholders' meeting on March 20 that its semiconductor business should recover to 2022 levels this year as the longstanding market slump begins to end. The company averaged operating profit of more than 10 trillion won a quarter that year.

Kyung discussed how Samsung is pushing its advanced packaging business after setting up a dedicated team last year. Part of his optimism coincided with Nvidia Corp. co-founder Jensen Huang's endorsement of Samsung as a supplier of high-bandwidth memory chips, critical components of the graphic processors that train AI systems. 

HBM is a key part of Samsung's effort to be the world's leading chipmaker, as the one part of the memory market where Samsung doesn't enjoy a clear lead over its competition. The company said its HBM sales rose by more than 40% in the December quarter, and that memory demand showed signs of recovery.

“AI — specifically the shift to on-device generative-AI -– will become a key catalyst to increased demand, resulting in continued price increases through the rest of the year,” Bassi said. “Samsung is well positioned to capture AI-led deployments with its latest high-capacity HBM product and potential collaboration with Nvidia.”

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