Samsung Q2 profit surges 15-fold on AI chip demand

Samsung reported Q2 operating profit surged nearly 1,500% compared to the same period last year driven by strong demand for its memory chips that are crucial in AI training. The performance was in line with projections.

Earlier this month, the electronics maker indicated it expected Q2 operating profit of between 10.3 trillion and 10.5 trillion Korean won, 15 times above the 670 million won recorded during the same period last year. The company also expected its quarterly revenue to be in the region of 73 trillion to 75 trillion Korean won, above the 60 trillion achieved in the second quarter of 2023. During its first quarter period, Samsung recorded 71.92 trillion Korean won sales.

Demand for AI services supports earnings growth

For the second quarter under review, Samsung’s revenue rose 23.42% to 74 trillion Korean won and an operating profit of 10.44 trillion won. The company attributed the growth to “favorable market conditions” which spurred higher sales prices.

The South Korean company indicated that the memory chip market maintained its growth trajectory on the back of AI investments by cloud service providers. Businesses have also pushed demand for AI for their on-premises servers.

As for PC demand, it remained depressed during the period in contrast to demand for mobile products which was firm due to increased orders from Chinese original equipment manufacturers (OEM) customers.

Samsung Q2 2024 results

• KRW 74.07 trillion (US $53.69 Billion) in consolidated revenue
• Operating profit of KRW 10.44 trillion (US $7.56 Billion)

Strong memory and OLED markets contributed to the high results. pic.twitter.com/PDK46C26v2

— Anthony (@TheGalox_) July 31, 2024

Samsung witnessed “robust” demand from server applications, which significantly improved earnings quarter-on-quarter as the company responded to demand for products for generative AI applications.

The company projects AI servers to take up a big portion of the market during the second half of 2024 driven by cloud service providers, while businesses also expand their AI investments. The company is also upbeat about its mobile demand.

“In the second half of the year, the release of new smartphones from major customers and potential replacement demand with the adoption of AI is expected to lead to an increase in mobile display sales.”

– Samsung

Samsung is however not blind to growing competition in the sector which may weigh on its business during the remainder of the financial year. “However, competition among panel makers is likely to be more intense than in the first half,” said Samsung.

Samsung to expand capacity to meet AI products demand

Demand for AI products is expected to remain solid during the second half of the year, across server products including HBM, solid-state-drive or SSD, and sever DRAM. HBM memory chips are essential for AI chips and have seen strong demand due to the AI boom.

Samsung revealed its plans to address the AI demand by increasing the latest memory product (HBM3E) sales through capacity expansion during the second half of the year. The company revealed it will also increase sales for SSDs, which are currently in high demand for AI servers.

Samsung declared a dividend of 361 won per common and preferred share for the Q2 period. “According to our current dividend policy, the total amount distributed per quarter amounts to approximately 2.45 trillion won, which will be paid near the end of August,” said Samsung.