Samsung Forecasts AI-Driven Chip Demand Surge as Q2 Profits Soar Over 15-Fold

Samsung Electronics has forecasted robust artificial intelligence-driven chip demand for the latter half of 2024. The company’s second-quarter operating profit soared over 15 times compared to last year, reaching 10.4 trillion won ($7.52 billion).

Boosted by Rebounding Semiconductor Prices

The AI boom has significantly boosted semiconductor prices. Samsung, the world’s largest memory chip manufacturer, saw its earnings rise from a low base a year ago. In the second half of 2024, AI servers are expected to dominate the memory market as major cloud providers and enterprises ramp up their AI investments.

Operating Profit and Revenue Surge

Samsung’s share price increased by 0.7% in morning trade. The company’s second-quarter revenue rose 23% to 74 trillion won. This marked Samsung’s highest operating profit since the third quarter of 2022. The chip division reported a 6.45 trillion won profit, its highest since Q2 2022.

Explosive Demand for High-End DRAM Chips

The surge in demand for high-end DRAM chips, such as high-bandwidth memory (HBM) chips used in AI chipsets, has been pivotal. These chips are essential for data center servers and AI services. Samsung’s second-quarter HBM revenue rose about 50% from the previous quarter. Rivals have also noted stronger AI chip demand, posting their highest quarterly profits in years.

Samsung’s HBM3 and Future Prospects

Samsung’s fourth-generation HBM, dubbed HBM3, has been cleared for use in certain AI processors. The company expects HBM3E chips to constitute 60% of its HBM sales by the fourth quarter. Analysts believe this aggressive target is achievable if HBM3E passes final approvals soon.

Focus on AI Applications

Samsung is concentrating production capacity on HBM, server DRAMs, and server SSDs for AI applications. Consequently, conventional supply of PC and mobile memory chips will be constrained in the second half of the year.

Mobile Devices Business Challenges

The mobile devices business experienced a drop in second-quarter operating profit by about 810 billion won from a year earlier. Despite steady shipments of 54 million smartphones, steeper parts costs impacted profitability. However, Samsung expects overall demand for smartphones to increase in the second half of 2024, driven by premium products with AI functions.

Launch of AI-Enabled Devices

Earlier this month, Samsung launched its latest AI-enabled flagship foldable phones and mobile accessories. These new products aim to compete in the premium smartphone segment, including a new health-monitoring ring. Samsung remains optimistic about the growing demand for these innovative products.