Samsung Electronics posts record quarterly profit on AI boom

Samsung Electronics reported record first-quarter operating profit of $38.4 billion – Copyright AFP SONNY TUMBELAKA

Jihye Shin and Matthew Walsh

Samsung Electronics said Thursday that operating profit soared 750 percent on-year to a record high in the first quarter thanks to strong sales of chips crucial for artificial intelligence, and forecast continued  healthy demand in the next three months.

The South Korean technology giant has emerged as a key player — along with rival SK hynix — in the supply of high-performing chips in demand from companies racing to keep up with the fast-evolving AI industry.

Their strong performance has come as the South Korean government has pledged to make the country one of the world’s top three AI powers alongside the United States and China.

Samsung said in its earnings report on Thursday it had “achieved record quarterly revenue and operating profit through AI technology innovations and proactive market response”.

It said operating profit came in at 57.2 trillion won ($38.4 billion), having said earlier in the month that it expected to reach a quarterly record.

Net profit hit 47.1 trillion won, beating forecasts in a Bloomberg survey of analysts, while sales reached 133.9 trillion won, an all-time quarterly high.

Its chips division also beat expectations with a huge rise in profit to 53.7 trillion won, accounting for the bulk of the unit’s total.

The company said its memory arm “surpassed its quarterly sales record by addressing high-value-added AI demand despite limited supply availability, with industry-wide memory price increases also a contributing factor”.

It added that it expected “strong memory demand to continue” through the second quarter as the buildout of AI infrastructure continues apace.

South Korea’s benchmark Kospi stock index jumped to a fresh record above 6,700 points following the figures, which came after strong earnings from US tech giants Microsoft and Alphabet.

– Riding the AI wave –

Samsung’s shares have risen around 300 percent over the past year as the AI boom boosts South Korean growth and pushes the stock market to new records.

The company has seen strong orders from major technology firms for high-bandwidth memory — a type of chip  used in data centres and AI “accelerators”, which are useful in carrying out demanding tasks and computation.

That is also pushing up the cost of less flashy chips used in consumer electronics — threatening higher prices for phones, laptops and other devices worldwide.

However, Samsung faces risks from a threatened strike next month as workers demand higher pay and bonuses.

Tens of thousands of unionised staff held a rally last week outside the company’s plant in Pyeongtaek, south of Seoul, to call for a seven percent wage hike, the end of a cap on bonuses and other benefits.

A group of unions representing nearly 90,000 workers in total have said they will stage a strike from May 21 to June 7 unless a deal with management is reached.

The company also faces a lawsuit in the United States alleging that it violated patents related to foldable smartphone technology by making and selling Galaxy Z Fold, Z Flip, and Z TriFold devices without permission, according to court documents.

SK hynix said last week reported net profit soared almost 400 percent to a record high in the first quarter, shrugging off concerns that the Middle East war could hit the semiconductor industry.