Samsung's First Quarter Profits Skyrocket Amid Chip Price Recovery, Exceeding Expectations

Samsung Electronics has exceeded market forecasts with stunning first-quarter earnings, driven by the rebound in chip prices and the success of its Galaxy S24 smartphone line, positioning itself for continued growth in the global market.

By Raunak Bose
New Update
Samsung Office

An Image of Samsung Office (Image via Getty Images)

One of the biggest brands in memory chips and TV production, Samsung Electronics has managed to record stunning first-quarter earnings figures, exceeding market forecasts by more than 10 times. This outstanding performance stems from the rebound in the price of chips, which is mainly driven by the demand for artificial intelligence solutions

Meanwhile, despite the relatively favourable financial prospects, investors showed a cautious response to the initiative and even the Samsung share price dropped on Friday. This reserved personality of the analyst hints toward the market sentiments when it comes to the updates on the company's high-end memory chip business that has worked continuously to retain the pace of its competitors.

Samsung expects its first-quarter operating profit to reach around 6.6 trillion won (4.89 billion USD), which is a steep hike from the previously reported figure of 187.6 billion won (14 million USD). The predicted figure will be the highest operating revenue since 2022 Q3 which is tailored by Samsung. Despite all that, the revenue turned out to be slightly less than expected, an 11% increase to 71 trillion won, instead of 72.3 trillion won.

Factors Driving Samsung's Financial Surge

Analysts believe that the imported goods inventory valuation of NAND flash chips ranking on the upside is a result of both increased demand and more demand tension. Moreover, the success of the latest Galaxy S24 smartphone line, which has built-in AI, on the device may push consumer purchasing towards higher-end devices. This will consequently impact profit margins the other way around.

Samsung S24 Series
Samsung Galaxy S24 Series (Left to Right - S24, S24 Plus & S24 Ultra) (via The Week)

What has been principal on the list of factors contributing to the surge of Samsung's financial performance is the recovery of chip prices, especially for DRAM and NAND flash chips. DRAM prices roughly returned almost 20% during the previous quarter of the year, while NAND chips prices were significantly higher and returned anywhere between 23% and 28% during the same timeframe. This rising trend demonstrates the growing requirement for memory chips, which is driven by more cutting-edge innovations such as artificial intelligence or high-sophistication memory (HBM).

Despite cutthroat rivalry against the local SK Hynix, Samsung is confident of its place in the market. HBM chip market analysts increasingly see Samsung as a force to be reckoned with, proving its ability to compete with other market leaders after its third-quarter release of the most powerful HBM chips.

On the contrary, seismic waves in Taiwan, a major semiconductor production country, have been on the rise with the events in recent years. This has heightened production-related concerns, potentially leading to a price spike in memory chips. Samsung and SK Hynix are anticipated to benefit from this situation as sales may increase during these two months, resulting in profit growth during the second quarter.

In the mobile business segment, Samsung will probably demonstrate recurrent profits after the successful release of their Galaxy S24 smartphone line. The analysts predict a huge growth of smartphone shipments, particularly encouraged by its good user feedback.

To sum up, then, Samsung's advanced result in the first quarter illustrates its ability to make it through difficult times and cope with the changing economic environment. Beyond the current growth phase, the chip industry is expected to maintain expansion, and Samsung finds itself in ample positions to take advantage of the arising opportunities while the company's trajectory continues an upward course in the global market.

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