SEOUL, April 7 — Samsung Electronics has projected that its first-quarter earnings would exceed its entire profit for last year, beating expectations as booming demand for artificial intelligence (AI) infrastructure stretched supply and drove chip prices higher.
The multinational company has emerged as one of the major beneficiaries of the AI data centre boom, which has constrained the supply of traditional chips used in smartphones, PCs, and game consoles and led to a near doubling of chip prices in the first quarter alone.
The world's largest memory chipmaker estimated an operating profit of ₩57.2 trillion (RM153.3 billion) for the January to March period, compared with an LSEG SmartEstimate of ₩40.6 trillion (RM108.8 billion) and a more than eightfold jump from ₩6.69 trillion (RM17.9 billion) a year earlier.
The record-high results nearly triple Samsung's previous quarterly operating profit record of ₩20 trillion (RM53.6 billion), set in the fourth quarter last year.
Research firm TrendForce expects contract DRAM (dynamic random access memory) chip prices to increase more than 50 per cent in the current quarter as the shortage persists.
“As customers anticipated further increases, actual contract prices came in higher, leading to the beat,” said Meritz Securities senior analyst Kim Sunwoo.
The company is also benefiting from a slump in the South Korean currency to a near-17-year low against the United States (US) dollar, which has boosted repatriated earnings.
Samsung's shares ended up 1.8 per cent to ₩196,500 (RM526.90) per share this morning, outperforming a 0.8 per cent rise in the wider market. Rival SK Hynix's shares finished 3.4 per cent higher.
Kim estimated that Samsung's memory chip business generated ₩54 trillion (RM144.7 billion) in operating profit, while its logic chip divisions posted a loss of ₩1.6 trillion (RM4.2 billion). The world's No.2 maker of smartphones after Apple fared better than feared in its mobile division, posting a ₩4 trillion (RM10.7 billion) profit, a slight decline from a year earlier.
He added that the mobile business was supported by the use of low-cost component inventories, but its margins will likely come under increasing pressure in the second quarter due to rising costs of memory chips and other components and materials amid the war in the Middle East.
Samsung said its revenue was expected to grow 68 per cent to ₩133 trillion (RM356.6 billion) in the January to March period.
The company will release details of its first-quarter earnings on April 30.
Headwinds
The rise in energy costs since the start of the US-Israeli war with Iran has sparked worries that cooling demand from AI data centres and other customers, as well as disruptions to the supply of key chipmaking materials, could slow the growth momentum for chip makers.
“There are growing concerns about a peak-out in memory price increases. It does appear that we are now past the initial upcycle phase and into a later stage," said NH Investment and Securities senior analyst Ryu Young-ho.
He noted that the key issue would be how Samsung structures long-term customer contracts to sustain its semiconductor earnings.
In a sign of cooling growth, spot prices for DRAM chips eased last week, as "end-user demand struggled to absorb elevated prices," said TrendForce senior vice president Avril Wu.
Spot DRAM prices refer to current market prices and trade at premiums over fixed-term contract prices.
These concerns, as well as the unveiling of Google's memory-saving technology TurboQuant last month, have contributed to a selloff in memory chip stocks, with Samsung's shares nine per cent since the war began on February 28.
That said, its shares are still up over 60 per cent this year, following a 125 per cent jump the previous year.
High bandwidth memory gains ground
About a year ago, Samsung's chief executive officer apologised for its disappointing earnings and share price performance after the tech giant lagged behind rivals in supplying high-bandwidth memory (HBM) chips critical to Nvidia's AI chipsets.
But it has been narrowing the gap with its South Korean rival SK Hynix by shipping its latest HBM4 chips to Nvidia in February.
However, Samsung's soaring earnings stem mainly from a rebound in traditional chip demand, fueled by AI inference, which enables AI models like ChatGPT to generate responses in real time, exacerbating a shortage of commodity chips.
Heungkuk Securities analyst Sohn In-joon estimated that HBM chips accounted for less than 10 per cent of Samsung's DRAM chip revenue in the first quarter.
He expects Samsung's total operating profit to reach another record high of ₩75 trillion (RM201.1 billion) in the current quarter, underpinned by an over 30 per cent rise in DRAM chip prices.
