Samsung Electronics expects a profit surge of approximately 1,400% for the quarter ending June 2024 compared to the same period last year. This growth is by the increasing adoption of artificial intelligence (AI) which has driven up demand for advanced computer chips.
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Samsung expects a jump in operating profit to 10.4 trillion won ($7.54 billion) up from 670 billion won in the same quarter last year. The company forecasts a 23.3% rise in sales projecting total revenues of 74 trillion won.
The surge in profit is largely driven by the AI sector, which has created demand for high-capacity storage solutions and advanced chips.
The demand for AI-related hardware has led to increased sales of high-capacity SSDs, where Samsung has a competitive edge due to its advanced technology in non-volatile storage solutions.
The shares rose by more than 2% during early trading following the profit forecast announcement.
The AI boom has benefited Samsung and also positively impacted other major players in the industry including NVIDIA.
The demand for AI servers and enterprise data storage has led to a 15% increase in average memory chip prices from the previous quarter, according to estimates by CLSA.
The $160 billion memory market saw a rebound this year with data centers and AI development acting as primary growth drivers.
Semiconductors remain South Korea’s leading export hitting a peak of $11.7 billion in March. This sector alone accounts for 20% of the country’s total exports.
The company’s expansion into the US market has been by a $6.4 billion grant from the United States to produce advanced chips in Texas.
The company’s strong net cash position has continued to support its credit quality, as said by Gloria Tsuen, Vice President and Senior Credit Officer at Moody’s Ratings.
The company has reclaimed its position as the top smartphone seller globally overtaking Apple, according to the International Data Corporation (IDC).
Samsung is facing labor protest with a three-day walkout planned by union organizers. This follows a strike, the first in the company’s 55-year history over a pay dispute.
The surge in demand for AI technologies including generative AI systems like ChatGPT which has increased the need for high-performance chips.
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After a period of declining prices, the market for advanced chips has rebounded leading to higher revenue for Samsung.
As the world’s largest memory chip maker, Samsung has benefited from the growing need for semiconductors in various industries from data centers to consumer electronics.
AI technologies require vast amounts of data processing power driving up the demand for high-capacity, non-volatile memory and advanced storage solutions.
The company’s expertise in producing high-layer memory chips has positioned it as a beneficiary of the AI-driven demand surge.
The firm is also expected to see increased sales of high-capacity SSDs (solid-state drives) used in data-intensive applications.
The rise in demand for AI chips has boosted Samsung’s earnings and also contributed to a market rally.
Major indices like the S&P 500 and the Nasdaq have reached new records by optimism around AI and the tech sector.
Other companies in the semiconductor industry such as Nvidia has also seen huge increases in market value.
The company’s strong performance in the semiconductor market has solidified its position as a global leader in technology and electronics. In addition to memory chips Samsung is also a major player in the smartphone and television markets.
Samsung is investing heavily in expanding its semiconductor production capabilities including a $6.4 billion grant from the U.S. to produce cutting-edge chips in Texas.
Semiconductors are South Korea’s leading export,with March 2024 seeing semiconductor exports hit $11.7 billion, their highest level in nearly two years.
Analysts predict that high-end chips (HBM) and SSDs will dominate the market in 2024 with Samsung working to catch up with SK Hynix in the HBM supply chain.
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