By Joyce Lee and Heekyung Yang
SEOUL (Reuters) – Samsung Electronics Co Ltd on Friday forecast a more than 15-fold jump in second-quarter operating profit, as a rebound in semiconductor prices driven by the artificial intelligence boom lifted earnings from a low a year ago.
The world’s largest maker of memory chips, smartphones and TVs estimated its operating profit rose to 10.4 trillion won ($7.54 billion) in the quarter ended June 30, compared with 670 billion won a year earlier.
Profit beat the LSEG SmartEstimate estimate of 8.8 trillion won, which tends toward analysts’ consistently more accurate forecasts, and the quarter was the most profitable since the third quarter of 2022.
In addition to higher chip prices, the better-than-expected earnings may reflect Samsung (KS:) reversing previous inventory writedowns on its books, as the value of its chip inventory has rebounded in accounting terms, analysts said.
Samsung said revenue likely rose 23 percent in the second quarter from a year earlier to 74 trillion won.
Samsung shares rose 1.2% after the guidance, compared with a 0.4% rise in the broader market.
The company is scheduled to report detailed second-quarter earnings on July 31.
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Samsung’s core semiconductor division is likely to post its second straight quarterly profit, improving from the first quarter, as memory chip prices continue to rise from mid-2022 lows to the end of 2023, driven by weak post-pandemic demand for gadgets that use the chips.
Analysts said huge demand for advanced DRAM chips such as high-bandwidth memory (HBM) chips used in artificial intelligence chips, as well as chips used in data center servers and devices that power AI services, helped support chip prices.
During the second quarter, memory chip prices rose by about 13% to 18% from the previous quarter for DRAM chips used in technical devices and by about 15% to 20% for NAND Flash chips used for data storage, according to data provider TrendForce.
But memory chip price growth may slow in the third quarter, with TrendForce expecting prices for both traditional DRAM and NAND Flash to rise by 5% to 10%, as demand for older chips from the consumer electronics market remains weak.
“At the earnings call at the end of the month, we will be interested in Samsung’s outlook on legacy chips, which will be a sign of whether this chip industry recovery can continue into next year,” said Ko Young-min, an analyst at Daul Investment & Securities.
Analysts said AI-driven demand for advanced chips such as HBM and solid-state drives (SSDs) will outpace the rest of the market, although Samsung has been lagging behind South Korean rival SK Hynix in supplying advanced HBM chips to customers such as Nvidia (NASDAQ:).
U.S. memory chip rival Micron Technology Inc (NASDAQ:MIC) beat estimates in its latest quarterly earnings last week, driven by increased demand from the artificial intelligence industry, although its outlook for the current quarter disappointed investors who had been more optimistic.
Investors are awaiting news on whether Samsung’s latest fourth-generation HBM chips will get approval to supply to Nvidia after failing previous tests due to issues with heat and power consumption, according to sources.
In May, Samsung replaced the head of its semiconductor division in an attempt to overcome what it called a “chip crisis.”
Samsung shares have risen 8% year-to-date through Thursday, compared with a 63% gain in SK Hynix shares.
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