Samsung Electronics Reports Over 10-Fold Increase in First-Quarter Operating Profit
Impressive Growth in Operating Profit
Samsung Electronics has estimated a remarkable over 10-fold rise in its first-quarter operating profit, driven by the rebounding semiconductor prices that lifted earnings significantly from a low base a year ago. This surge comes after a severe downturn in chip demand last year.
Better-Than-Expected Results
The world’s largest memory chip and TV maker projected that its operating profit surged to a better-than-expected 6.6 trillion won ($4.89 billion) in the quarter ending March 31. This figure marks a substantial 931% increase from the 640 billion won recorded a year earlier, making it Samsung’s highest operating profit since the third quarter of 2022.
Exceeding Forecasts
While the operating profit estimate surpassed the 5.7 trillion won LSEG SmartEstimate, the revenue fell slightly short of expectations, likely increasing by 11% to 71 trillion won from the same period last year.
Factors Driving Growth
According to analyst Park Sung-soon, the improved inventory valuation of NAND flash chips and the increased demand for NAND have contributed to better margins. Additionally, the positive response to the new Galaxy S24 smartphones, especially with on-device AI features, may have driven sales of high-margin premium smartphones.
Upcoming Earnings Report
Samsung is set to release detailed earnings on April 30, providing a deeper insight into its performance across various business segments.
Positive Trends in Chip Prices
The chip division, Samsung’s primary revenue generator, is expected to report its first quarterly profit in five quarters as memory chip prices have rebounded significantly. DRAM chip prices rose approximately 20% during the first quarter, while NAND flash chip prices increased by 23% to 28%, signaling a positive trend in the semiconductor market.
Market Impact of Taiwan Earthquake
The recent earthquake in Taiwan may tighten semiconductor supply, potentially leading memory chip makers like Samsung to raise prices further than initially planned, which could boost second-quarter earnings.
Success in Mobile Business
Samsung’s mobile business is anticipated to have reported a solid profit following the launch of the flagship Galaxy S24 smartphones. Analysts estimate an increase in smartphone shipments and average selling prices, supporting overall profitability.
Market Response
Despite the positive earnings outlook, Samsung shares experienced a slight decline in early trade, aligning with broader market trends influenced by Federal Reserve officials’ statements on interest rate adjustments.
Samsung shares were down 0.5% in early morning trade versus a 0.4% drop in the wider South Korean market, tracking U.S. market falls after Federal Reserve officials spoke about the need to keep interest rate cuts in check.
($1 = 1,348.9300 won)
