Samsung Reports Strong Second Quarter Results Driven by AI Chip Demand
Samsung Electronics on Wednesday reported higher-than-expected second-quarter revenue and operating profit driven by strong demand for its advanced memory chips used in artificial intelligence (AI) training. The company’s revenue jumped 23.42% year-on-year to 74.07 trillion Korean won (about $53.45 billion), while operating profit soared 1,458.2% to 10.44 trillion Korean won. This performance outpaced analysts’ expectations, indicating a strong recovery for the memory chip industry.
Key Takeaways:
- AI-powered boom: Samsung’s strong performance is attributed to the growing demand for high-bandwidth memory (HBM) chips which are essential for AI chips. This demand surge is fueled by the rapid advancements in AI technology.
- Memory Price Uptrend: Analysts predict continued growth in memory chip prices for several quarters, suggesting potential for continued profit growth for Samsung. This upward trend is attributed to concerns about memory supply in the face of increased demand for HBM and high density enterprise SSDs.
- Samsung’s HBM3 Clearance: Samsung has reportedly cleared tests for the use of its HBM3 chips in Nvidia processors for the Chinese market, marking a significant step in the company’s expansion in this crucial market for AI technology.
- Galaxy Device Push: Samsung has announced global availability for its new Galaxy devices, including the Galaxy Z Fold6, Z Flip6, Watch Ultra, and Ring, demonstrating the company’s commitment to pushing AI-powered products into the market.
High-Bandwidth Memory: Fueling the AI Revolution
HBM chips have become crucial components in the AI revolution. These chips are optimized for high bandwidth and low latency, crucial for processing the massive datasets required for AI applications. With the rapid development of AI models and increasing reliance on cloud computing, the demand for these specialized memory chips has surged.
Samsung and SK Hynix, the two leading memory chip makers, are benefiting from this demand. Samsung, in particular, is seeing a strong rebound after facing record losses in 2023 due to a post-Covid slump in demand for memory chips.
Analysts, such as CLSA and Daiwa Capital Markets, are optimistic about Samsung’s future performance. CLSA predicts quarterly sequential profit growth for Samsung until 2025, fueled by increased memory chip prices. Daiwa Capital Markets forecasts a memory price hike trend until the first half of 2025, driven by increased concerns about memory supply and demand for high-bandwidth memory and high-density SSDs.
Competition in the AI Memory Market
Despite Samsung’s strong showing, the AI memory market remains fiercely competitive. SK Hynix, for example, logged its highest quarterly profit in six years, also attributed to strong demand for AI chips. The company was previously the sole supplier of HBM3 chips to Nvidia, but Samsung’s clearance of tests for the Chinese market could disrupt this dominance.
Counterpoint Research believes that Samsung will see "greater uptick to its operational performance" in the second half of the year, driven by strong memory chip demand and the "premiumisation" trend in smartphones. However, Neil Shah, Research Vice President at Counterpoint Research, warns that SK Hynix and Micron will continue to challenge Samsung in this market, forging close partnerships with key players like Qualcomm, Intel, and Nvidia.
Looking Ahead: Samsung’s AI Strategy
Samsung’s strong second-quarter results demonstrate the company’s success in tapping into the growing demand for AI chips. The company’s focus on HBM chips, its push for AI-powered products, and its reported clearance for the Chinese market all point to a continued commitment to this key emerging technology. However, competition remains fierce in the AI memory market, and Samsung will need to continue innovating and adapting to maintain its position as a leader in this dynamic field.
