Samsung says AI to drive technology demand in second half

Samsung says AI to drive technology demand in second half
Samsung signage is seen in a store in Manhattan, New York City, US, Nov 22, 2021.
PHOTO: Reuters file

SEOUL — Samsung Electronics said on Tuesday (April 30) it expected demand for artificial intelligence to hold strong in the second half, driving sales of memory chips and tech devices, as it reported a more than 10-fold rise in first-quarter operating profit.

The South Korean company's memory chip sales nearly doubled in the first quarter from a year earlier as prices rose steeply from a severe downturn, thanks to the boom in AI.

"In the second half of 2024, business conditions are expected to remain positive with demand — mainly around generative AI — holding strong, despite continued volatility relating to macroeconomic trends and geopolitical issues," Samsung said in a statement.

Samsung shares were up 1.6 per cent in morning trade, outpacing a 0.5 per cent rise in South Korea's benchmark index.

The world's biggest maker of memory chips and TVs said operating profit rose to 6.6 trillion won (S$6.5 billion) in January-March, up from 640 billion won a year earlier.

That was in line with Samsung's own estimate of 6.6 trillion won flagged earlier this month, its highest operating profit since the third quarter of 2022.

First-quarter revenue rose 13 per cent to 71.9 trillion won, the company said, including a 96 per cent increase in memory chip revenue to 17.49 trillion won.

It cemented a recovery from an unprecedented memory chip downturn caused by weak post-pandemic demand for gadgets that use chips.

Memory chip profit

The chip division, historically Samsung's cash cow business that used to make up two-thirds of the company's operating profit, swung to profit of 1.91 trillion won in the March quarter from a 4.58 trillion won loss a year earlier.

Samsung's memory chip business reported a profit for the first time since the third quarter of 2022 due to customers buying chips in anticipation prices would rise further in future.

Prices of NAND flash chips used to store data increased by 23 per cent to 28 per cent during the first quarter versus the previous quarter, while prices of DRAM chips used in tech devices rose by about 20 per cent, according to data provider TrendForce.

South Korean rival SK Hynix said last week it expected a full recovery in the memory chip market on AI demand as it posted its highest profit in nearly two years.

Samsung said it began mass production this month of the latest high bandwidth memory (HBM) chips for use in generative AI chipsets, called 8-layer HBM3E, as it seeks to capitalise on the AI boom that has benefited its rivals.

It said it plans to start making the 12-layer version during the second quarter.

Samsung's mobile devices business booked a 3.51 trillion won operating profit in the first quarter, down from 3.94 trillion won a year earlier. Rising costs, including increased memory chip prices, dented margins from its flagship Galaxy S24 smartphones launched during the quarter.

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