Highlights

• Operating profits reached KRW 6.61 trillion, a significant increase from last year.
• Galaxy S24 series contributed to strong smartphone sales.
• Semiconductor business saw a major rebound, especially in memory chips.
• Strategic focus on high bandwidth memory to support AI and computing.

Samsung Electronics has kicked off 2024 on a strong note, reporting operating profits of KRW 6.61 trillion ($4.85 billion) for the first quarter.

That’s a tenfold increase compared to the same period last year when the South Korean behemoth was grappling with headwinds.

However, the impressive Q1 performance indicates Samsung has well and truly bounced back from the lows of recent quarters and 2023.

“Operating profit increased to KRW 6.61 trillion ($4.85 billion) as the Memory Business returned to profit by addressing demand for high value-added products,” it said in a statement.

Strong smartphone sales, higher prices for semiconductors plus a focus on high-value-added products including HBM — the high-bandwidth memory used in AI hardware — were key to the strong performance, it said.

“Looking ahead to the second quarter, the industry is expected to remain solid, led mainly by demand for generative AI,” the company added.

Sales were up 12.8 percent on-year to 71.9 trillion won, the company said.

“Demand for on device AIs and high resolution features continues to drive our production,” said Tommy Kwon, vice president of Samsung’s system LSI business, on an earnings conference call.

The weakness of the Korean won — down nearly seven percent against the US dollar so far this year — “resulted in a positive impact on company-wide operating profit of about KRW 0.3 trillion compared to the previous quarter,” Samsung added.

Samsung’s “overall outlook is secured by a resurgence in the smartphone market, escalating DRAM prices, and a modest decline in Fed interest rates,” Brady Wang, associate director of market research firm Counterpoint, told AFP.

“Samsung is strategically positioned to thrive amidst the evolving market conditions.”

But to maintain its momentum, the tech giant needs to “focus on accelerating development in emerging areas like high bandwidth memory, crucial for AI and high-performance computing,” he said.

Samsung had a “surprise” on its earnings thanks to “the recovery in memory demand”, said Tom Kang, research director of Counterpoint.

“The market environment is becoming more favorable to Samsung. Recovery in the smartphone market is also going to be tailwinds, combined with the rebound in memory prices.”

Read on to find out how the company made this turnaround.

Smartphone Sales Rebound

While overall demand for premium and mid-range phones declined as expected due to typical seasonality, Samsung’s flagship Galaxy S24 lineup proved to be a solid hit.

The company credited “continued efforts in resource optimization” for delivering “solid double-digit profitability” with the S24 series.

AI features like Circle to Search on the S24 models saw high usage rates and contributed to sales growth according to Samsung.

Apart from that the weaker Korean won provided an additional KRW 0.3 trillion tailwind to operating profits versus Q4 2023.

Semiconductor Resurgence

However, it was the resurgent semiconductor business that truly powered Samsung’s profits in Q1 2024.

A significant rebound in pricing for NAND, DRAM, and other crucial memory chips fueled by strategic stockpiling bolstered the component division’s performance.

Looking ahead, Samsung said it needs to “accelerate development in emerging areas like high bandwidth memory” which is critical for AI systems and high-performance computing workloads. 

With generative AI taking the world by storm, demand for advanced chips powering these technologies has skyrocketed.

Overall, by capitalizing on influential product launches and favourable market conditions, the Korean juggernaut has re-established its competitive edge heading into the remainder of 2024.

FAQs

What contributed to Samsung’s substantial increase in operating profits for Q1 2024?

Samsung’s operating profits for the first quarter of 2024 saw a dramatic increase, largely due to strong sales from the Galaxy S24 series and a significant rebound in the semiconductor market, particularly in memory chips.

How did the Galaxy S24 series impact Samsung’s profits?

Despite a general decline in demand for smartphones, the Galaxy S24 series experienced solid sales, bolstered by innovative AI features and optimization efforts, contributing to double-digit profitability for this segment.

What was the role of the semiconductor division in Samsung’s Q1 earnings?

The semiconductor division played a crucial role in boosting Samsung’s profits, with increased pricing and demand for NAND and DRAM chips. Strategic stockpiling by clients also contributed to this success.

What future plans does Samsung have for its semiconductor business?

Samsung plans to accelerate the development of high bandwidth memory, which is vital for advanced computing and AI technologies, indicating a strategic pivot towards supporting high-performance computing needs.

How did currency factors affect Samsung’s financial performance?

The depreciation of the Korean won provided an additional boost to Samsung’s operating profits, adding about KRW 0.3 trillion to the company’s earnings, illustrating the impact of exchange rate fluctuations on global businesses.

Samsung Electronics reported financial results for the first quarter ended March 31, 2024.  All Details?

The Company posted KRW 71.92 trillion in consolidated revenue on the back of strong sales of flagship Galaxy S24 smartphones and higher prices for memory semiconductors.

Operating profit increased to KRW 6.61 trillion as the Memory Business returned to profit by addressing demand for high value-added products.

The Mobile eXperience (MX) Business posted higher earnings and the Visual Display and Digital Appliances businesses also recorded increased profitability.

The weakness of the Korean won against major currencies resulted in a positive impact on company-wide operating profit of about KRW 0.3 trillion compared to the previous quarter.

The Company’s total capital expenditures in the first quarter stood at KRW 11.3 trillion, including KRW 9.7 trillion for the Device Solutions (DS) Division and KRW 1.1 trillion on Samsung Display Corporation (SDC).

Spending on memory was focused on facilities and packaging technologies to address demand for High Bandwidth Memory (HBM), DDR5 and other advanced products, while foundry investments were concentrated on establishing infrastructure to meet medium- to long-term demand.

Display investments were mainly made in IT OLED products and flexible display technologies.

Has Memory Business Returns to Profit for Samsung ? Is Second Quarter Expected to Remain Solid on AI Demand?

The DS Division posted KRW 23.14 trillion in consolidated revenue and KRW 1.91 trillion in operating profit for the first quarter.

For servers and storage, demand for generative AI showed solid trends, while demand for DDR5 and high-density SSDs remained strong.

For PCs and mobile overall, content-per-box continued to grow for both DRAM and NAND, and demand remained robust on the back of active sell-in driven primarily by Chinese mobile OEM customers.

The Memory Business returned to profit as it achieved qualitative growth by addressing the demand across servers, storage, PC and mobile, focusing on high-value-added products such as HBM, DDR5, server SSDs and UFS 4.0., along with the increase in ASP.

Looking ahead to the second quarter, the industry is expected to remain solid, led mainly by demand for generative AI.

For servers and storage, the continuous increase in the supply of AI servers and subsequent expansion of associated cloud services will increase demand not only for HBM but also for conventional servers and storage solutions.

Demand for mobile is expected to be stable in the quarter, while PC customers are predicted to be affected by slow seasonality, making them likely to adjust their inventories ahead of new product launches in the second half of the year.

The Company started mass production of HBM3E 8H this month and plans to mass produce HBM3E 12H products and a 128GB product based on 1b nanometer1 (nm) 32Gb DDR5 within the second quarter.

The Company also started mass production of V9 NAND for the first time in the industry this month.

In the second half of 2024, business conditions are expected to remain positive with demand — mainly around generative AI — holding strong, despite continued volatility relating to macroeconomic trends and geopolitical issues.

For HBM, the Company will continue to increase supply in order to respond to growing demand for generative AI. In DRAM, the Company plans to accelerate 1b nanometer-based 32Gb DDR5 supply with faster ramp-up speeds and further strengthen its competitiveness in the high-density DDR5 module market.

For NAND, the Company plans to enhance technology leadership by mass producing quad-level cell (QLC) for V9 in the third quarter.

The System LSI Business increased the supply of systems on chips (SoCs) and sensors for major customers’ new products, but earnings improvements have taken longer than anticipated as Display Driver IC2 (DDI) sales were impacted by slowing panel demand.

With smartphone sell-out likely to show signs of recovery after a slow start, the System LSI Business will focus on providing a stable supply of flagship SoCs and sensors and is also preparing to ship products based on advanced technologies for new wearables.

For mobile sensors, the utilization rate is expected to remain high, including the mass production of 50MP products for global customers. For DDIs, sales are expected to continue expanding to meet demand from a major customer for new IT/TV products.

Amid a likely intensified pressure for component pricing, the System LSI Business will proactively adjust its product mix to navigate these challenges effectively.

The Foundry Business saw a delay in sales improvement due to weak market demand and continued inventory adjustments. Still, efficiency efforts in fab operations became more visible, which allowed it to narrow losses slightly.

The development of advanced 3nm and 2nm technologies is progressing smoothly, and 4nm technology yields have stabilized. This improvement in advanced technology competitiveness helped the Foundry Business achieve its highest ever order backlog in the first quarter.

Amid a likely gradual recovery in market conditions, second-quarter revenue is expected to rebound and reach double-digit quarter-on-quarter growth after bottoming in the first quarter.

The Foundry Business plans to complete the development of 2nm design infrastructure and prepare 4nm technology applicable to 3D IC. For mature technologies like 14nm and 8nm, it plans to prepare infrastructure for multiple applications.

In the second half of 2024, the foundry market is expected to see limited growth as uncertainties are likely to persist.

However, the Foundry Business expects to outpace the market growth rate in annual sales thanks to increased sales of leading-edge technologies of 5nm and below.

It will start mass production of Gate-All-Around (GAA) 3nm second-generation technology and improve the maturity of 2nm technology to focus on high-growth applications like AI and high-performance computing (HPC).

Is SDC Planning To Focus on Flexible Displays and IT/Automotive ? Does it Aim for Sales Growth in Large Panels?

SDC posted KRW 5.39 trillion in consolidated revenue and KRW 0.34 trillion in operating profit for the first quarter.

In the mobile display business, while intensifying competition led to a decline in earnings from the previous quarter, SDC ensured the timely supply of flexible displays for a major customer’s high-end smartphones and improved the utilization rate for rigid displays.

For the large display business, SDC narrowed losses on the back of new QD-OLED monitor products and a stronger customer base, despite an ongoing curb in demand.

While SDC expects sales to increase in mobile displays with the launch of new foldable phones from a major customer and stronger demand for IT products in the second quarter, earnings growth is likely to be impacted by intensifying competition.

As for large displays, SDC plans to address demand for TV panels for a major customer and seeks to expand sales of premium monitors.

In the second half of the year, SDC will focus on maintaining competitiveness by expanding the sales of flexible displays with low power consumption and improved durability while also continuing to replace LCD displays in smartphones with rigid display products.

Furthermore, SDC plans to boost its IT and automotive businesses in order to diversify its business portfolio.

SDC aims to increase large display sales from the previous year by improving the production efficiency of QD-OLED displays and enhancing the product mix, focusing on high-valued-added offerings.

Does MX Business Post Revenue Growth Amid Market Decline ? Do they Plan Continued Investment in AI ?

The MX and Networks businesses posted KRW 33.53 trillion in consolidated revenue and KRW 3.51 trillion in operating profit for the first quarter.

Market demand for premium and mid-range smartphone segments decreased sequentially in volume and value as the smartphone market entered the seasonally slower first quarter.

However, the MX Business achieved revenue and operating profit growth due to strong sales of the Galaxy S24 series and maintained solid double-digit profitability through continued efforts in resource optimization.

In particular, Galaxy AI features on the S24, such as Circle to Search, continued to see high usage rates and contributed to sales growth.

In the second quarter, overall demand for smartphones is expected to decline sequentially due to seasonality. Accordingly, the MX Business expects smartphone shipments to decline and tablet shipments to remain consistent sequentially.

The MX Business will maintain its flagship-oriented sales approach in the second quarter by applying the Galaxy S24’s AI experience to other flagship models and maximizing product competitiveness.

Additionally, the MX Business will aim to secure solid profitability by continuing to streamline operations in light of continued geopolitical instability and likely increases in the cost of key components.

At the same time, the MX Business will remain committed to investing in R&D, including in AI, despite a challenging environment.

In the second half of the year, the smartphone market is expected to rebound due to stabilizing consumer sentiment, the expansion of AI products and services and economic growth in emerging markets.

The MX Business will seek annual growth in smartphone sales and aims to maintain sales momentum through the expansion of Galaxy AI to existing and new flagship products across foldable devices and tablets.

For wearables, it will strengthen the Galaxy ecosystem experience through the expansion of new models and form factors like the Galaxy Ring.

For smartwatches, the MX Business will strive to meet demand for upgrades through the launch of new premium models.

Additionally, the MX Business will continue to seek operational efficiencies to counter rising component costs to ensure solid annual profitability, and it will continue to invest in research and development to further expand and refine Galaxy AI.

Do Visual Display and Digital Appliances To Continue Breaking New Ground in the AI Era?

The Visual Display and Digital Appliances businesses posted KRW 13.48 trillion in consolidated revenue and KRW 0.53 trillion in operating profit in the first quarter.

The Visual Display Business posted higher quarter-on-quarter profitability even as the overall market demand decreased by concentrating on premium products, such as Neo QLEDs, OLEDs and TVs above 75″.

However, profitability declined year-on-year due to stagnant TV market demand and increased costs amid intensifying market competition.

In the second quarter, overall market demand is expected to remain weak due to declining TV demand in emerging markets, but major global sporting events may lead to opportunities to increase sales.

The Visual Display Business will focus on securing profitability, enhancing sales of strategic products and strengthening operations management in each business segment.

In the second half of 2024, overall TV demand is expected to recover gradually amid an uncertain macroeconomic and geopolitical environment.

The Visual Display Business will address diverse consumer needs while promoting “AI Screen Leadership,” driven by innovative premium TVs and Lifestyle screens.

Additionally, it will provide differentiated customer experiences through connected devices and drive market growth by promoting advanced features based on security and sustainability, as well as boosting competitiveness in service businesses such as Samsung TV Plus.

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