2024-04-07 02:43:38
Semiconductor sales exceeding KRW 1 trillion, surplus in 5 quarters
Total operating profit of KRW 6.6 trillion, earnings surprise
Samsung Electronics recorded an ‘earnings surprise’ in the first quarter (January to March) due to the recovery of the memory semiconductor market and strong sales of the new artificial intelligence (AI) smartphone ‘Galaxy S24’ series. The overall operating profit jumped 10 times compared to a year ago, and the semiconductor (DS) division turned a profit in five quarters, raising expectations that “the long tunnel in the semiconductor industry is over.”
Samsung Electronics announced on the 5th that its consolidated sales for the first quarter were provisionally calculated at KRW 71 trillion and operating profit at KRW 6.6 trillion. Compared to the same period last year, sales increased by 11.4%, recovering to the 70 trillion won range in five quarters. Operating profit jumped 931.3% compared to the same period last year, exceeding last year’s annual operating profit (KRW 6.57 trillion). This figure exceeds the securities industry consensus (average forecast) of 5.4 trillion won by 22.2%.
After the announcement of the provisional results on this day, the securities market estimated that the DS division, which was hit hard by the memory semiconductor downcycle (recession), led the good performance with an operating profit in the late 1 trillion won range. The DS division’s operating profit turned red in the first quarter of last year, resulting in an annual loss of 14.87 trillion won.
The semiconductor industry believes that the effect of memory semiconductor production cuts, which led to SK Hynix and Micron in the fourth quarter of 2022 (October to December) and Samsung Electronics in the second quarter of last year (April to June), has been reflected in earnest. The increasing demand for high-value products such as high-bandwidth memory (HBM) used in AI chips also had an impact.
Ahn Ki-hyun, executive director of the Semiconductor Industry Association, said, “The current memory rise is largely dependent on rising semiconductor prices and increased server demand,” and added, “For demand for information technology (IT) devices such as mobile phones and PCs to recover, a global economic recovery, including an easing of the U.S. benchmark interest rate, is necessary.” “It must be accompanied,” he said.
‘Semiconductor-AI Galaxy’ surprise performance… US interest rates and the Chinese economy are variables
Samsung Electronics’ first quarter operating profit was KRW 6.6 trillion.
The effect of reducing DRAM production is reducing inventory and increasing prices.
Increased sales proportion of high value-added products such as HBM
Phone shipments recover to 60 million units, operating profit KRW 3.8 trillion
The provisional performance for the first quarter (January to March) announced by Samsung Electronics on the 5th exceeds the expectations of securities companies by more than 20%. The semiconductor (DS) division, whose operating profit is expected to exceed 1 trillion won, is leading the ‘earnings surprise’, and this is analyzed to reflect the effect of the world’s first artificial intelligence (AI) smartphone ‘Galaxy S24’ giving a boost from behind. do. However, in order to continue the strong performance trend for a long period of time, the global economic recovery and the reopening of the Chinese economy are expected to be variables.● Semiconductor operating profit expected to recover to 1 trillion won
According to related industries on the 5th, Samsung Electronics’ first quarter operating profit predicted by the securities industry was 5.4 trillion won. However, when we opened the lid, it turned out that the actual operating profit was 6.6 trillion won, exceeding about 1.2 trillion won. The securities industry believed that most of the surprising performance came from the DS division, and raised the DS division’s operating profit forecast this afternoon from an average of 400 billion won to 1.6 trillion to 1.9 trillion won.
The biggest reason for the strong performance of semiconductors in the first quarter is the effect of production cuts. At the end of 2022, when the global semiconductor demand slump began in earnest, SK Hynix and Micron, and Samsung Electronics in April last year decided to reduce memory production, and semiconductor inventories began to decrease from the second half of last year (July to December). According to market research firm DRAM Exchange, the fixed transaction price of general-purpose DRAM products (DDR4 8Gb) for PC bottomed out at $1.30 in September last year, began to rebound in October, and recovered to $1.8 as of March this year.
Accordingly, memory sales are also recovering, with companies that demand semiconductors seeking to purchase them in advance before prices rise further. The industry analyzed that as product prices rose, the price increase of the products the company had in stock was recorded as profit. Kim Seon-woo, a researcher at Meritz Securities, analyzed, “It is understood that one-off factors (based on inventory valuation) of about 1.7 trillion won were reflected in memory operating profit in the first quarter.”
In addition to the recent launch of smartphones equipped with artificial intelligence (AI), the expansion of generative AI services also supported the strong performance by increasing the sales proportion of high value-added products such as high-bandwidth memory (HBM). Previously, at the end of January, Samsung Electronics said in a conference call, “The proportion of advanced products, including HBM3 (4th generation HBM) and HBM3E (5th generation), accounted for more than half of HBM sales volume in the first half of this year (January to June), and in the second half of the year, “It is expected to reach the 90% level,” he said.
The end of the semiconductor recession tunnel is also being revealed in the performance of other companies. Micron, the world’s third-largest DRAM company known as the ‘weathervane of the semiconductor industry’, reported sales of $5.82 billion (approximately KRW 7.9 trillion) in the second quarter of this fiscal year (December to February) on the 20th of last month (local time). It announced a surprising performance that exceeded Wall Street expectations, saying that its net profit per share was $0.42. For SK Hynix, which is scheduled to announce its first quarter earnings on the 25th of this month, securities companies’ first quarter operating profit forecasts continue to be revised upward.
● AI smartphone boom… Key to global economic recovery
The Mobile Experience (MX) division, which launched the Galaxy S24 series, the first AI-equipped smartphone in January of this year, also supported strong performance in the first quarter. Based on the stock market consensus, the MX division’s operating profit forecast is 3.8 trillion won. This figure is similar to the same period last year and is an increase of approximately 1 trillion won compared to the previous quarter. According to SK Securities, the MX division’s smartphone shipments in the first quarter recovered to the previous year’s level, reaching about 60 million units. In particular, the high-end model ‘Galaxy S24 Ultra’ is known to be leading the sales boom.
The industry believes that for the same performance increase as in the first quarter to continue, prerequisites such as recovery in demand for information technology (IT) devices such as mobile phones and PCs and the reopening of the Chinese economy remain. Samsung Electronics announced its provisional results on this day and commented on the sluggish demand for system semiconductors, saying, “Demand recovery in major applications such as mobile is insufficient.”
An official in the semiconductor industry said, “I am skeptical about whether Samsung Electronics will be able to continue producing surprise results like the first quarter in the future,” and added, “The market environment will change depending on the timing of the US base interest rate easing.”
Reporter Kwak Do-young [email protected]
Reporter Byun Byeon-guk [email protected]
2024-04-07 02:43:38