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    Friday, July 5, 2024

    Samsung Anticipates Revenue Growth by Harnessing the Potential of AI

    Samsung anticipates a significant increase in profits due to the positive impact of artificial intelligence (AI) implementation.

    Samsung Electronics projected a substantial increase in its operating profit for the second quarter, with a more than 15-fold rise. This surge is attributed to the recovery of semiconductor prices, driven by the growing demand for artificial intelligence. The improved earnings mark a significant improvement compared to the previous year’s low base.

    The world's leading manufacturer of memory chips, smartphones, and televisions reported a significant increase in its operating profit for the quarter ending on June 30th. The company’s operating profit rose to 10.4 trillion won ($7.54 billion), a substantial increase from the 670 billion won reported during the same period the previous year.

    The profit surpassed the LSEG SmartEstimate of 8.8 trillion won, which places more weight on forecasts from consistently accurate analysts. This quarter was the most profitable since Q3 2022.

    In addition to the increase in chip prices, the better-than-anticipated profit is likely a result of Samsung reversing its previous inventory write-downs on its financial records. This is because the value of its chip inventory has experienced a rebound in accounting terms, as per the analysis of industry experts.

    It Is projected that revenue increased by approximately 23% in Q2 compared to the corresponding period last year, reaching 74 trillion won, as per Samsung’s statement.

    Samsung’s stock experienced a 1.2% increase following the guidance, outperforming the broader market which saw a modest 0.4% rise.

    The organization is scheduled to disclose comprehensive financial results for the second quarter on July 31.

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    Samsung’s principal semiconductor division has potentially achieved its second consecutive quarterly profit, demonstrating an improvement over the first quarter. This positive development is attributed to the ongoing rise in memory chip prices, which had previously experienced a trough from mid-2022 to end-2023 due to a decline in post-pandemic demand for devices utilizing these chips.

    The recent surge In demand for cutting-edge DRAM chips, particularly high bandwidth memory (HBM) chips utilized in AI chipsets, along with chips employed in data center servers and devices facilitating AI services, has contributed to the sustained elevation of chip prices, as per industry analysts.

    During Q2, memory chip prices experienced a significant increase. DRAM chips, commonly found in tech devices, saw a price jump of approximately 13% to 18% compared to the previous quarter. Similarly, NAND Flash chips, utilized for data storage, witnessed a price hike ranging from 15% to 20%. This information was obtained from TrendForce, a reputable data provider.

    The potential rise In memory chip pricing may experience a deceleration during the third quarter. TrendForce predicts a moderate price increase ranging from 5% to 10% for both conventional DRAM and NAND Flash chips. This adjustment is attributed to the lackluster demand for older, legacy chips within the consumer electronics market.

    "At the earnings call at the end of the month, we will be interested in Samsung's outlook on legacy chips, which will be a sign for whether this chip industry recovery can last into next year," said Ko Yeongmin, an analyst at Daol Investment & Securities.

    The demand for high-end chips, such as HBM and solid-state drives (SSDs), is expected to surpass the growth of the overall market, according to industry analysts. However, Samsung is currently lagging behind its South Korean competitor, SK Hynix, in supplying high-end HBM chips to major customers like Nvidia.

    Micron Technology, a prominent competitor in the U.S. memory chip industry, surpassed analysts’ projections for its most recent quarterly revenue. This achievement was primarily attributed to a substantial increase in demand from the artificial intelligence sector. However, the company’s forecast for the current quarter fell short of investors’ heightened expectations, resulting in disappointment among shareholders.

    Investors are eagerly anticipating the outcome of Samsung’s latest fourth-generation HBM chips’ evaluation for potential supply to Nvidia. The chips previously encountered challenges during testing due to heat and power consumption issues, raising concerns among stakeholders.

    Samsung replaced the head of its semiconductor division in May in an effort to address the ongoing chip shortage.

    As of Thursday, Samsung shares had an 8% year-to-date increase, while SK Hynix shares experienced a 63% rise.

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