Sat, Apr 06, 2024 page12

• Samsung’s profit rebounds on chip division

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

  The world’s largest maker of memory chips yesterday reported preliminary operating profit of about 6.6 trillion won (US$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.

  

  A man walks past the Samsung logo on a glass door at the company’s Seocho building in Seoul yesterday.

  Photo: AFP

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

  “Revenue came short of expectations,” Counterpoint Research director Tom Kang said.

  The preliminary results signal that the business is back to normal, Kang said.

  “Chip production reduction was the right move and Samsung is now on its path to benefit from the AI [artificial intelligence] trend in both semiconductors and smartphones,” he said.

  Samsung is to 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.

  Stronger pricing for memory chips is helping, too.

  Major DRAM producers increased prices by 7 percent to 10 percent on average in the first quarter as inventory levels normalized for products such as smartphones and PCs, said 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 cofounder Jensen Huang’s (黃仁勳) endorsement of Samsung as a supplier of high-bandwidth memory (HBM) 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 does not enjoy a clear lead over its competition.

  The company said that its HBM sales rose by more than 40 percent in the fourth quarter last year 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.”

  Fund managers have begun shifting money into Seoul-listed Samsung to ride its expected bounce.

  While the stock price of AI titan Nvidia has tripled in the past 12 months and its key HBM supplier, SK Hynix, has more than doubled, Samsung is seen having greater upside after a mere 32 percent gain.

  “We’ve started reducing our holding in SK Hynix and allocating it to other parts of the memorychip value chain that haven’t benefited as much, like Samsung Electronics, where we think that upside hasn’t yet been realized,” said Christine Phillpotts, portfolio manager at Ariel Investments LLC. “We expect some catalyst to occur for that upside to be materialized in Samsung.”

  Samsung has outperformed other AI stocks since an endorsement by Huang in March fueled expectations for an HBM supply deal later this year.

  That would help it gain a key foothold in the battle with smaller SK Hynix, which is estimated to have a 90 percent share in the latest version of HBM.
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