Samsung shares: Shares rose after the technology company reported a big jump in profits

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Reuters
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Samsung Electronics expects demand for artificial intelligence to remain strong and the supply of some advanced chips to shrink, joining competitors in benefiting from a strong recovery in the faltering global memory chip market.

Upbeat forecasts from the world's largest memory chip maker sent its shares up 1.8% on Tuesday after it reported a more than 10-fold increase in first-quarter operating profit.

But so far this year, Samsung shares are down 0.8%, lagging SK Hynix's 24% gain, as it seeks. Right With its smaller rival supplying cutting-edge chips such as high-bandwidth memory (HBM) to AI leader Nvidia (NVDA).

“We plan to more than triple the supply of HBM-related chips in 2024 compared to last year,” Jaejun Kim, Samsung’s vice president in charge of the memory division, said on an earnings call.

Samsung said it began mass production this month of its latest HBM chips for use in generative AI chips, called the 8-layer HBM3E. It seeks to capitalize on the AI ​​boom that has benefited SK Hynix, which was the sole supplier of HBM3 chips to Nvidia.

Samsung said it plans to start making the 12-layer version during the second quarter, and expects the latest HBM3E products to account for two-thirds of HBM's production by the end of the year.

Analysts said the goals were aggressive.

It looks like Samsung's 8-layer HBM3E will supply Nvidia, while the 12-layer may go to AMD (AMD) and Nvidia, said Jeff Kim, head of research at KB Securities.

“Since Samsung's technology is advantageous for high stacking, while SK Hynix has its advantages in 8-layer, there may be fragmentation where Nvidia gets 12-layer products from Samsung and most 8-layer products from SK Hynix,” Kim said. .

“Samsung is working hard to improve the productivity of its 12-layer product,” he added.

Samsung did not immediately respond to a request for comment from HBM customers.

Samsung also said it will boost its high-end SSD product offerings to meet demand for AI servers, and expects the supply of high-end memory chips to become tighter towards the end of the year due to the focus on capacity on HBM, echoing comments from SK Hynix. last week.

The South Korean company's first-quarter revenue rose 13% to 71.9 trillion won ($52.14 billion), including a 96% increase in memory chip revenue to 17.49 trillion won as prices rose sharply from a sharp downturn, partly due to the boom. In artificial intelligence.

Operating profit rose to 6.6 trillion won in the January-March period, compared to 640 billion won a year earlier. This was the company's highest operating profit since the third quarter of 2022.

The chip division, Samsung's cash cow that accounted for two-thirds of its operating profit, swung to a profit of 1.91 trillion won in the March quarter from a loss of 4.58 trillion won a year earlier. This is the first profit since the third quarter of 2022.

Prices for NAND flash chips used to store data rose by 23% to 28% during the first quarter compared to the previous quarter, while prices for DRAM chips used in technical devices rose by about 20%, according to data provider TrendForce.

Samsung's mobile device division achieved operating profit of 3.51 trillion won in the first quarter, down from 3.94 trillion won in the previous year.

It shipped about 60 million smartphones during the quarter, in line with the previous year but reclaiming its title as the world's top smartphone seller from Apple (Camel), which suffers from declining sales in China.

Higher costs, including increased memory chip prices, led to lower margins for its flagship Galaxy S24 smartphones launched during the quarter.

Samsung said AI functions were driving sales of the S24 phones, allowing the division to maintain double-digit profitability in the first quarter. The company said that about 50% of customers said they bought S24 phones for the AI ​​functions, and 60% were using the AI ​​functions regularly.