Samsung takes flight on AI memory demandSamsung takes flight on AI memory demand

An AI-driven rise in memory prices is set to propel Samsung Electronics to a 15-fold leap in operating profit.

The Korean chips, handset and appliances giant has forecast operating profit of 10.4 trillion Korean won (US$7.5 billion) for the second quarter, flying past analysts' estimates of a 26% higher number.

Samsung expects second-quarter revenue to rise by as much as 25% to approximately KRW74 trillion ($53.6 billion). Sequentially, operating profit is expected to grow 57% and revenue by 4%.

The company did not break out segment figures, but analysts forecast an operating profit of around KRW5 trillion ($3.6 billion) for the semiconductor unit, Yonhap news agency reported. That compares to KRW1.9 trillion ($1.4 billion) in the first quarter – the chip division's first quarterly profit since the final quarter of 2022.

The device business is expected to post operating profit of KRW2.3 trillion ($1.7 billion), and the display and home appliances groups are estimated to have recorded about KRW700 billion ($510 million) in total.

Samsung's stock rose 3% Friday. It is up 21% in the past 12 months as the chip and handset markets rebound from the post-COVID slump.

Memory prices up 15%

AI and data center demand has driven average memory chip prices 15% higher than they were in the previous quarter, investment firm CLSA has estimated. The heavy memory consumption of the GPUs built by AI leader Nvidia is the chief reason for the spiraling demand.

Samsung is the world's biggest memory supplier, with a share of worldwide DRAM and NAND output last year of 47% and 32% respectively, according to tech research company Trend Force.

Both Samsung and high bandwidth memory (HBM) market leader SK Hynix are now aggressively switching out resources into HBM production to support the AI market.

The two companies have both maxed out their HBM production for 2024, they recently revealed, with SK Hynix saying it has almost completely booked out its 2025 output as well.

Samsung, which expects to triple its HBM output this year, has now consolidated its HBM research teams into a single group, with a focus on building the fifth-generation HBM3E and sixth-generation HBM4 chips.

The World Semiconductor Trade Statistics (WSTS) organization has forecast the memory segment will grow 77% this year, to $163 billion, after declining 29% in 2023. The market is tipped to grow 13% in 2025.