Samsung’s profit grows fastest in years after AI powers chips

(Bloomberg) — Samsung Electronics Co. reported the fastest pace of profit growth in years, reflecting a rebound in demand for memory chips as AI development accelerates globally.

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The world’s biggest maker of memory chips and smartphones reported preliminary operating profit of 10.4 trillion won ($7.5 billion) in the June quarter, versus forecasts of 8.3 trillion won. Sales reached 74 trillion won. Samsung is scheduled to announce final earnings with divisional breakdowns later this month.

The results underscore how the $160 billion memory market is recovering this year from a severe post-Covid recession, driven by a boom in data centers and AI development. That demand drove up average memory chip prices by 15% from the previous quarter, CLSA estimates, helping Samsung’s largest division reverse losses from the previous year.

South Korea’s government said this week that the country exported the largest number of semiconductors on record in June, bringing its trade surplus to $8 billion – the highest since 2020.

Although Samsung is benefiting from a broader sector recovery, investors remain concerned about its market position in the newer field of AI chips relative to SK Hynix Inc. Its shares have lagged behind its smaller rival, now the major supplier of high-bandwidth memory or HBMs, a vital component of AI hardware. It has been fighting to get its latest HBM chips certified by Nvidia Corp., which has become the world’s most valuable chipmaker thanks to insatiable demand for AI accelerators.

Samsung is releasing the results days before union organizers plan to stage a three-day strike among its more than 28,000 members – including at major chip factories – over a pay dispute. The proposed action follows a strike involving a small number of employees last month, the first in the company’s 55 years. It is unclear at this time how many employees plan to participate in Monday’s walkout.

In the long term, Samsung’s focus remains on recovering its memory chip division.

Investors are increasingly concerned about Samsung’s response to SK Hynix, which recently reported its fastest pace of revenue growth since at least 2010. This has fueled a roughly 60% rally in SK Hynix shares since the beginning of 2024, compared to a gain of about 8% for Samsung shares.

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In May, Samsung unexpectedly named Jun Young Hyun — a memory chip veteran who is returning to the company after leading Samsung SDI Co. — as the new leader of its most important business line, replacing Kyung Kye-hyun.

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