Samsung's profit soared by 932% in the first quarter! AI detonated the storage fever, and the future research and development smashed AI

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2024-05-01 15:30Posted on the official account of Beijing Zhidong

Zhidong (public account: zhidxcom)

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Zhidong reported on May 1 that Samsung Electronics announced its first-quarter financial report data. According to the report, as of March, Samsung's consolidated revenue increased by 12.81% over the same period last year, and its operating profit soared by 932.8% over the same period.

Samsung Electronics' first-quarter profit surged thanks to widespread AI-driven spending. Samsung Electronics said the company's consolidated revenue reached 71.92 trillion won due to the hot sales of the Galaxy S24 smartphone and the rise in the price of memory semiconductors. Operating profit increased to KRW 6.61 trillion as the memory business returned to profitability by meeting high value-added demand.

Citi analysts pointed out that Samsung's NAND flash memory business outlook is positive, driven by the demand for AI computing. In a note released on April 5, Citi reiterated a "buy" rating on Samsung Electronics with a price target of 120,000 won, up 56% from Monday's closing price of 76,700 won.

NAND is another major memory chip alongside DRAM. "We expect storage to be the next bottleneck in AI computing, especially in AI training," Citi analysts said. Samsung Electronics will be one of the main beneficiaries. ”

Samsung said it expects business to be driven primarily by generative artificial intelligence (AIGC) demand in the second quarter, with mobile demand remaining stable. At the same time, the company expects PC demand to be impacted by a seasonal slowdown, which could lead customers to adjust inventories ahead of new product launches in the second half of 2024.

In addition, Samsung Electronics warned that demand and shipments of smartphones may decline in the second quarter due to seasonal factors, but a rebound is expected in the second half of the year.

1. The memory business has turned a profit, and AI demand is expected to remain stable in the second quarter

On April 30, Samsung Electronics announced its financial results for the first quarter ended March 31, 2024. According to the report, Samsung's Digital Solution (DS) division, which is responsible for the semiconductor business, reported consolidated revenue of 23.14 trillion won and operating profit of 1.91 trillion won in the first quarter.

In the server and storage space, demand for AIGC is stable, while demand for DDR5 memory and high-density SSDs remains strong. In terms of PCs and mobile devices as a whole, demand for DRAM memory and NAND flash memory continues to grow, mainly driven by aggressive sales from Chinese mobile device manufacturers.

In addition, as the supply of AI servers continues to increase and related cloud services expand, the demand for HBM, traditional servers, and storage solutions is likely to increase. Samsung said it will continue to increase HBM supply to meet the growing demand for AIGC

Samsung expects that despite continued macroeconomic and geopolitical volatility, demand for mobile devices may remain stable in the second quarter, mainly driven by AIGC demand, while PC customers may be affected by the off-season, so they may adjust their inventory before the launch of new products in the second half of the year.

It is reported that due to uncertainty or persistence, Samsung's foundry market growth in the second half of 2024 will be limited. However, the annual sales growth rate of the foundry business is expected to outpace the overall market growth rate due to increased sales of leading technologies of 5nm and below. The foundry industry will start mass production of Gate-All-Around (GAA) 3nm second-generation technology and ramp up R&D efforts on 2nm technology, with a focus on high-growth areas such as AI and high-performance computing (HPC).

Second, the MX business grew against the trend, and Samsung continued to increase its investment in AI

According to the report, the MX and network business reported consolidated revenue of 33.53 trillion won and operating profit of 3.51 trillion won in the first quarter.

In the first quarter, demand and value in the high-end and mid-range smartphone market continued to decline as the smartphone market entered a seasonal slowdown. However, thanks to the strong sales of the Galaxy S24 series, the MX business achieved growth in both revenue and operating profit. It is reported that the Galaxy AI feature on the Galaxy S24 series continues to maintain a high usage rate, which has contributed significantly to the growth of its sales.

Overall smartphone demand is expected to decline sequentially in the second quarter due to seasonal effects. In this regard, Samsung said that the MX business plan will continue to focus on flagship products, and apply the AI experience of the Galaxy S24 to other flagship models to maximize product competitiveness. Given the continued geopolitical volatility and the risk of rising costs for critical components, the MX business will streamline operations to ensure stable profitability. At the same time, the company will continue to invest in research and development, especially in AI.

In the second half of the year, the smartphone market is expected to rebound due to the expansion of AI products and services, as well as the growth of emerging market economies.

It is reported that in order to achieve annual growth in smartphone sales, Samsung plans to maintain sales momentum by expanding Galaxy AI technology to existing and new flagships, including foldable devices and tablets. For wearables, the MX business will introduce new models and different form factors, such as the Galaxy Ring, to enhance the experience of the Galaxy ecosystem. In the field of smart watches, the MX business will strive to meet the needs of users to upgrade and launch new high-end models.

Third, the demand for TV market has stagnated, and the profit margin of the visual display business has declined

According to Samsung's financial report, the consolidated revenue of Samsung's visual display and digital home appliance business reached 13.48 trillion won in the first quarter, and the operating profit was 0.53 trillion won.

As market demand was mainly focused on high-end products, such as Neo QLED, OLED, and TVs over 75 inches, overall demand for Samsung's products declined, but the visual display business still showed high quarterly profitability. However, the stagnation of the TV market demand and the fierce competition in the market led to higher costs, and the profitability of the visual display business declined year-on-year.

In the second quarter, TV demand in emerging markets declined, and overall demand is expected to remain weak, but major global sporting events may provide opportunities for sales growth. Samsung said the visual display business will focus on ensuring profitability, improving sales of strategic products, and strengthening the operational management of various business units.

In the second half of 2024, overall TV demand is expected to gradually recover in the face of uncertainties in the macroeconomic and geopolitical environment. It is reported that Samsung's visual display business will drive market growth and enhance the competitiveness of Samsung TV and other businesses by providing differentiated customer experience for connected devices and features based on security and sustainability.

Source: CNBC

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