Samsung Electronics has predicted a more than 780 percent leap in third-quarter operating profit from a year earlier, buoyed by high memory chip prices as AI fuels a global supply shortage. The South Korean giant estimated July-September operating profit at 107.4 trillion won, up 782.5 percent on-year. This surge is driven by the company's dominance in memory chips, which are in huge demand for use in data centres powering artificial intelligence.
The AI boom has already helped Samsung and other semiconductor giants around the world post record profits this year. Samsung is the world's largest maker of memory chips, and advanced types are being snapped up for use in data centres powering artificial intelligence. The company's revenue likely rose 127 percent to 195 trillion won, hitting an all-time high. This performance will help Samsung break its own records for both sales and operating profit for four consecutive quarters.
Analysts at South Korean brokerage Shinhan Securities have struck a bullish stance on Samsung's trajectory, expecting to see "even stronger earnings" from the company next year. They noted that Samsung Electronics now appears all set for a rapid increase in market share as the company ramps up production of a new generation of high-bandwidth memory chips, called HBM4. This will open up opportunities for Samsung to renegotiate prices and guarantee solid margins.
Samsung, its South Korean rival SK hynix, and US giant Micron dominate the global market for high-bandwidth memory chips, which are used in AI data centres alongside other powerful data-crunching semiconductors. The transition to next-generation HBM will enable Samsung to maintain its market position and benefit from the growing demand for AI-related chips.
While Samsung's earnings have surged on strong demand for memory chips, the boom has also pushed up prices for DRAM and NAND flash used in smartphones. This has forced the company's mobile division to pay more for the same chips, making it challenging for Samsung to absorb rising production costs without increasing prices and affecting shipment volumes and market share.
As earnings skyrocket for chipmakers, including Samsung, many workers are demanding a bigger cut of the profits. Samsung averted a strike in South Korea earlier this year by agreeing to a deal to distribute bonuses equivalent to 10.5 percent of operating profit to its semiconductor employees. However, in Taiwan, union representatives said hundreds of workers at a Micron plant had voted in favour of a strike after talks with the US company over bonus reforms collapsed.
Samsung announced a buyback of up to $80 billion of its own stock to boost shareholder returns, ensuring that the "fruits of the company's growth translate into tangible benefits" for shareholders. The company's final quarterly earnings report is expected at the end of October, and investors are eagerly awaiting more details on its performance and future prospects.
Key points
- Samsung Electronics predicts a 780% leap in Q3 operating profit due to high memory chip prices fueled by AI demand.
- The AI boom has helped Samsung and other semiconductor giants post record profits this year.
- Samsung workers are demanding a bigger cut of the profits as earnings skyrocket for chipmakers.
