Samsung flags 10-fold rise in Q1 profit as chip prices recover

FE Team | Published: April 07, 2024 23:51:53

SEOUL, Apr 7 (Reuters): Samsung Electronics estimated on Friday its first-quarter operating profit would rise more than 10-fold, topping market expectations, as chip prices have started to rebound from a severe downturn thanks to a boom in artificial intelligence.
But the guidance was not enough to cheer investors who sent Samsung shares down 1.3% early on Friday, in line with a 1.1% drop in the wider South Korean market as they await updates on progress in its high-end memory chip business that has been lagging behind rivals.
The world's largest memory chip and TV maker estimated its operating profit rose to a better-than-expected 6.6 trillion won ($4.89 billion) in the quarter ended March 31, beating a 5.7 trillion won LSEG SmartEstimate.
That was up 931% from 640 billion won a year earlier and would be Samsung's highest operating profit since the third quarter of 2022.
But revenue missed expectations, likely rising 11% from the same period a year earlier to 71 trillion won, below a LSEG SmartEstimate of 72.3 trillion won.
"Since revenue was mostly in line but operating profit beat expectations, the inventory valuation of NAND flash chips may have improved. Demand for NAND has improved, which may have improved margins as well," said Park Sung-soon, an analyst at Korea Investor Relations Service.
"Initial response to new Galaxy S24 smartphones was also positive due to on-device AI, so if greater-than-expected portion of the high-margin premium smartphones were sold, it would have an impact."
The company is due to release detailed earnings on April 30.
The better performance came as its chip division, traditionally its biggest earner, is expected to report its first quarterly profit in five quarters as memory chip prices bounce back from a deep trough that began in mid-2022 due to weak post-pandemic demand for gadgets.
DRAM chip prices rose about 20% during the first quarter versus the previous quarter, while NAND flash chip prices increased by 23% to 28%, according to data provider TrendForce.
The bullish outlook for memory chip demand, including exploding appetite for chips such as high-bandwidth memory (HBM) used in AI chipsets, has driven a 34% rise in Samsung shares over the last 12 months, beating a 10% gain in the broader market.