Samsung Electronics Co’s semiconductor arm brought in historic profit last quarter, beating expectations with a 48-fold jump as artificial intelligence (AI) data center orders delivered hefty margins.
The chipmaking unit, which competes with SK Hynix Inc and US-based Micron Technology Inc in memory, reported an operating income of 53.7 trillion won (US$36.26 billion) in the first quarter. The result compares with the average analyst estimate of 35.3 trillion won. Group-wide net income rose to 47.1 trillion won.
The results reflect massive spending by hyperscalers, with Meta Platforms Inc and Alphabet Inc planning to plow even bigger sums into AI infrastructure. That is spurring some investors to bet that high-bandwidth memory — one of the key bottlenecks to AI’s rise — is no longer beholden to boom-and-bust cycles and could tap sustained growth.
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“The more relevant question is duration: How long does HBM4 pricing power hold, and is AI infrastructure spending durable?” Roundhill Investments CEO Dave Mazza said. “Absent a material deceleration in hyperscaler capex, the earnings runway supports current multiples.”
Samsung is “substantially” increasing its own capital spending this year, the company said on a conference call to discuss its earnings, without elaborating. It is on track to provide samples of HBM4e, the next generation of its most advanced chips for AI use, in the current quarter — ahead of SK Hynix’s road map for the latter half of the year. Samsung also sees the surging margins for conventional memory narrowing the gap to HBM next year.
The company has very limited inventory and available supply is “far short of customer demand,” a Samsung executive said on its call.
Samsung’s demand-fulfillment rate is at a record low and the supply-demand gap is likely to further widen next year, its management said.
Accelerators such as those made by Nvidia Corp are limited by the speed and capacity of memory to supply data, making DRAM a key factor in determining the quality of AI services.
Analysts expect Samsung’s chip division to build on its record-breaking profit over the next several quarters, as contract prices continue their steep upward trajectory amid limited supply. They point to a more than 180 percent rise in South Korea’s chip exports during the first 20 days of last month as a sign of continued momentum for Samsung and SK Hynix.
Counterpoint Research expects a 60 percent quarter-on-quarter rise in average DRAM contract prices in the April-to-June period, analyst Tom Kang said.
Average contract prices for DRAM rose 42 percent sequentially last month, the research firm’s monthly memory price tracker showed.
Samsung — the world’s largest memory maker — is considering a shift toward multiyear contracts with the aim to stabilize supply and ease concerns about shortages, company co-CEO Jun Young-hyun told shareholders at an annual general meeting last month. Such a move would further bolster prices and provide a buffer against cyclical downturns.
The chip unit’s profit growth contrasts with declines in Samsung’s mobile and displays operations, which are fighting rising materials and components prices.
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