Samsung profit up tenfold on soaring AI chip demand

Samsung Electronics' chip business has put the conglomerate right into the gen AI sweet spot, propelling it to a tenfold increase in operating profit for the recent first quarter.

The Korean giant blew past expectations with a 6.6 trillion Korean won (US$4.8 billion) operating profit, up from 640.2 billion ($460 million) a year ago, on 12.8% higher sales of KRW71.9 trillion ($51.9 billion).

Analysts' consensus operating profit forecast was KRW5.6 trillion ($4 billion), according to financial data service Yonhap Infomax.

The semiconductor business, which has been in the red since the fourth quarter of 2022, reported operating profit of KRW1.91 trillion ($1.4 billion), rebounding from a KRW4.6 trillion ($3.3 billion) loss last year.

Samsung, the world's large memory chip firm, said memory demand had been strong and prices were continuing to rise, with gen AI creating solid demand for advanced RAM chip DDR5 and storage.

Capex for the quarter was KRW11.3 trillion ($8.2 billion), with KRW9.7 trillion ($7 billion) allocated to its chip business, mostly on new facilities and packaging for high bandwidth memory (HBM) and DDR5 to meet AI demand.

Samsung also retained its crown as world's biggest handset brand in the quarter, shipping 60 million units.

On-device AI

But the smartphone and networks business reported KRW3.5 trillion ($2.5 billion) profit, down 11% from last year, despite growing revenue by 5% to KRW33.5 trillion ($24.2 billion).

The company said growth had been buoyed by its first AI-powered smartphone. It described on-device AI as a significant growth opportunity and aims to boost smartphone sales this year by deploying AI on other handset models.

It said that stabilized consumer sentiment and economic growth in emerging markets would also power demand for smartphones and other devices this year.

It was another tough quarter for the networks business, though, with revenue plunging 31% to KRW740 billion ($530 million). Sales in its major markets of South Korea and North America both declined again, the company said.

Samsung said it expected continued robust performance in its memory business for the rest of the year, supported by growing sales of PC and mobile chips thanks to on-device AI.

It said its foundry business, which had posted a narrow loss in the first quarter, would rebound to double-digit growth in the second as market conditions recover.