(By Liu Rui, April 7th, Financial Association)
Amidst the surge in artificial intelligence, dwindling chip inventories, and a rebound in market demand, global memory chip prices are gradually recovering from last year's slump, casting a significant ray of hope on Samsung Electronics' latest quarterly earnings report.
Samsung Electronics anticipates a staggering nine-fold increase in its operating profit for the first quarter of this year. This signifies a remarkable turnaround for the world's largest memory chip manufacturer since the third quarter of 2022, following the chip winter experienced last year.
Has Samsung finally emerged from the chip winter?
In recent days, Samsung Electronics released its performance guidance indicating that operating profit for the first quarter is expected to increase by approximately 931% year-on-year, from 6.4 trillion Korean won (about 34.3 billion CNY) to 66 trillion Korean won (about 353 billion CNY).
Meanwhile, Samsung's first-quarter revenue also saw a year-on-year increase of 11.4%, reaching 71 trillion Korean won (about 380.5 billion CNY). However, the final official financial results will be announced at the end of April.
The rebound in Samsung's performance largely stems from the recovery in the chip market. Park Sung-soon, an analyst at Korea Investor Relations Service, remarked, "Samsung's revenue is essentially flat year-on-year, but operating profit exceeds expectations, indicating a possible improvement in the valuation of NAND flash memory chips. Improved market demand for NAND may also enhance profit margins."
Last year, amidst the chilling effect on the memory chip market, Samsung endured its worst year in 15 years: in 2023, Samsung's operating profit plummeted by 84.92% year-on-year to 6.54 trillion Korean won (about 35.6 billion CNY), marking its lowest level since the global financial crisis of 2008.
However, since the end of last year, the strong demand for high-performance chips driven by the AI boom, coupled with several memory chip manufacturers significantly reducing production, have all contributed to the recovery of memory chip prices.
Roko Kim, an analyst at Hana Financial Investment, stated, "We've seen a stronger-than-expected recovery in the memory cycle, with memory chip prices rising more than expected. This year will maximize DRAM revenue, and NAND prices will also surge."
Could Samsung be in for more good news?
Apart from the chip cycle recovery, Samsung may also be poised for more good news in the near future.
Last month, NVIDIA CEO Jensen Huang hinted at NVIDIA's interest in acquiring Samsung's HBM chips during a media briefing at the NVIDIA GTC 2024 event. Subsequently, South Korean media reported that NVIDIA could begin mass purchasing Samsung Electronics' 12-layer HBM3E as early as September. If confirmed, this could further drive potential growth in Samsung Electronics' future performance.
Additionally, following the major earthquake in the Hualien region of Taiwan on April 3rd, the Taiwanese chip supply chain is inevitably experiencing short-term disruptions, exacerbating the global chip shortage situation and potentially further increasing chip prices for Samsung and NVIDIA.
Samsung's next-generation artificial intelligence smartphone, the Galaxy S24, launched in January this year, is also expected to make a significant contribution to the company's profit in the financial report. The S24 series, with its successful AI features, has been well-received since its launch, leading Samsung to become the world's largest smartphone seller in February. There are reports that Samsung Electronics has already raised the first-quarter sales target for this phone from 12 million to 13 million units internally.
Park Sung-soon, an analyst at Korea Investor Relations Service, pointed out, "The initial market response to the newly launched Galaxy S24 smartphone has also been good, so if sales of high-profit-margin premium smartphones exceed expectations, it will also have an impact."
