Samsung expects Q2 profit to surge by 1,400%
What's the story
Samsung Electronics, a leading company in memory chips, smartphones, and television production, is forecasting a significant profit increase of around 1,400% for the quarter ending June 2024 compared to the same period last year. This surge is largely attributed to the widespread adoption of artificial intelligence (AI), which has escalated demand for advanced computer chips. Following this announcement, Samsung shares saw a more than 2% rise during early trading hours in Seoul.
Profit boosters
Profits bolstered by rising chip prices and demand
In a regulatory filing, the company said it is expecting profit to rise to 10.4 trillion won ($7.54 billion), from 670 billion won last year. The company's sales are projected to rise by 23.3% to 74 trillion won. "The development of AI has driven the demand for high-capacity SSDs," said Avril Wu, an analyst from TrendForce. The AI boom has not only propelled Samsung's earnings but also positively impacted the entire sector, including chip-making giant NVIDIA.
Market position
Position strengthened by high-capacity SSDs
Samsung's ability to make higher-layer, non-volatile storage that doesn't require power to retain data has positioned it as a key beneficiary of the rising demand for high-capacity SSDs, according to TrendForce analyst Avril Wu. Semiconductors, South Korea's leading export, reached $11.7 billion in March, their highest level in nearly two years, accounting for 20% of the country's total exports. In April, Samsung received grants of up to $6.4 billion from the United States to produce cutting-edge chips in Texas.
Financial stability
Samsung's credit quality supported by net cash position
Samsung's robust net cash position continues to bolster its credit quality, according to Gloria Tsuen, vice president and senior credit officer at Moody's Ratings. This financial stability comes as the company regains its position as the top smartphone seller, taking back the lead from Apple, as per International Data Corporation (IDC) in April. The South Korean tech giant is expected to release its final earnings report at the end of this month.