Samsung projects 1,452% surge in Q2 profit on robust chip growth

Samsung Electronics forecasts a 1,452 percent yearly rise in operating profit for the second quarter, staging a dramatic recovery for its semiconductor business.

Samsung Electronics office building in southern Seoul [NEWS1]

Samsung Electronics forecasts a 1,452 percent yearly rise in operating profit for the second quarter, staging a dramatic recovery for its semiconductor business.

In a preliminary earnings report released Friday, the Suwon, Gyeonggi-based tech giant expects to post an operating profit of 10.4 trillion won ($7.5 billion), exceeding the market consensus of 8.3 trillion won compiled by market tracker FnGuide.

The company projects quarterly sales of 74 trillion won, up 23.3 percent on-year, slightly above the market estimate of 73.8 trillion won.

Samsung’s operating profit surpassed the 10-trillion-won threshold for the first time in seven quarters, following a semiconductor downturn that hit bottom last year.

The upbeat performance since the first quarter is attributed to increased prices of memory chips like dynamic random-access memory (DRAM) and NAND flash.

“Average selling prices of DRAM grew higher than expected while allowances for loss on inventory valuations of NAND could be bigger than anticipated,” said Kim U-no, an analyst at IBK Securities, who predicts that the company’s chip business accounted for 6.1 trillion won of the company's 10.4 trillion won in operating profit.

Kim revised up the chip business profit from 3.7 trillion won, following the preliminary earnings announcement.

The preliminary forecast does not include detailed breakdowns.

Kim said its smartphone business posted 2.4 trillion won in operating profit, while the panel-making business run by Samsung Display made 965 billion won. The consumer electronics segment is expected to post 526 billion won in operating profit, according to Kim.

Despite the steep growth generated by the chip division, most of the revenue comes from commodity memory chips rather than high-end ones like high bandwidth memory(HBM).

“The second-quarter operating profit was led by the surge of prices in the commodity memory range like DDR5 and LPDDR5X,” said Kim Dong-won, an analyst at KB Securities, adding that those general-purpose memory chips account for over half the entire DRAM sales from Samsung.

The concentration on commodity chips is a primary concern for the Korean chip giant since high-performing lines like HBM can ensure far higher profitability and overall technological supremacy in the generative AI boom.

In the HBM range, local rival SK hynix remains ahead of Samsung, clinching major deals with Nvidia.

Samsung is testing HBM chips to be supplied to Nvidia, but they have not yet passed.

In the smartphone sector, the tech giant is betting on the release of the Galaxy Z Flip and Fold 6, which will debut on July 10 in Paris.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]