Samsung Electronics projects a significant increase in first-quarter operating profit, driven by improved chip prices and demand in artificial intelligence.

1. Operating Profit Projection:

• Estimated first-quarter operating profit to increase over 10-fold, surpassing market expectations.
• Despite positive outlook, investors responded cautiously, leading to a 1.3% decline in Samsung shares.

2. Financial Performance Highlights:

• Operating profit expected to reach 6.6 trillion won ($4.89 billion), surpassing LSEG SmartEstimate of 5.7 trillion won.
• Represents a 931% increase from the previous year and highest since Q3 2022.
• However, revenue missed expectations, likely reaching 71 trillion won, below the LSEG SmartEstimate of 72.3 trillion won.

3. Factors Contributing to Performance:

• Improved inventory valuation of NAND flash chips likely contributed to higher operating profit.
• Positive response to new Galaxy S24 smartphones, featuring on-device AI, potentially increased sales of high-margin premium smartphones.

4. Outlook for Chip Division:

• Chip division expected to report first quarterly profit in five quarters.
• DRAM and NAND flash chip prices rose approximately 20% and 23-28% respectively in Q1 compared to the previous quarter.
• Rising demand for memory chips, including high-bandwidth memory (HBM) for AI chipsets, driving positive market sentiment.

5. Market Competition and Future Prospects:

• Samsung’s stock performance has trailed behind cross-town rival SK Hynix in the HBM market.
• Samsung plans to introduce latest HBM chips in the third quarter to enhance competitiveness.
• Recent earthquake in Taiwan likely to tighten semiconductor supply, potentially leading to price hikes and improved second-quarter earnings.
• Solid profit expected in mobile business with strong sales of Galaxy S24 smartphones.

Conclusion:

• Samsung Electronics’ anticipated surge in first-quarter operating profit reflects positive trends in chip prices and demand, particularly in the AI sector.
• Despite challenges in market competition, Samsung remains focused on innovation and product advancement to maintain its position in the semiconductor industry and mobile market.