Samsung’s profit surges after AI boom reverses chip losses

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Samsung Electronics Co.’s earnings surged after the semiconductor business returned to profitability for the first time since 2022, boosted by broad spending on artificial intelligence development.

The world’s largest memory chipmaker reported net income of 6.62 trillion won ($4.8 billion) in the March quarter, versus the average analyst projection for 5.63 trillion won. That’s more than four times the company’s earnings a year earlier.

The results underscore how demand for the memory chips that power modern electronics and artificial intelligence is starting to rebound after a severe downturn. The company’s shares rose less than 1% in early Seoul trading.

Samsung, also the world’s largest smartphone maker, is trying to reverse a year-long decline triggered by global economic uncertainty. In 2023, the company’s overall operating profit plunged to a 15-year low after its semiconductor unit posted a loss of 14.9 trillion won.

Signs are pointing to a gradual market rebound, driven in part by demand for chips used to develop AI after the advent of OpenAI’s ChatGPT. Samsung’s chip division posted a a better-than-projected 1.91 trillion won operating profit, its first quarter in the black after four successive losses. South Korean trade data released this month showed semiconductor shipments led growth in the country’s exports in the first 20 days of April, rising 43% from a year earlier.

In its earnings release, Samsung said it expects chip demand to remain strong in the current quarter and the second half of this year. It said that the industry should remain strong, in large part because of the demand for generative AI.

Longer-term, Samsung is trying to catch smaller rival SK Hynix Inc. in the rapidly expanding market for high-bandwidth memory or HBM, which is optimized for use with Nvidia Corp. AI accelerators. Hynix last week reported its fastest pace of revenue growth since 2010, said overall memory demand is on a steady growth path, citing double-digit price rises in the broader DRAM market and the NAND market.

Samsung said it began mass production of its latest HBM product, HBM3E 8H, and plans to mass produce future HBM chips in the second quarter.

Kyung Kye-hyun, who leads Samsung’s semiconductor business, said at the company’s annual shareholders’ meeting in March that the division should recover to 2022 levels this year as the longstanding slump begins to end. The company averaged an operating profit of more than 10 trillion won a quarter that year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow