Samsung's massive Q2 profit driven by AI-fueled memory chip boom

Samsung Electronics' staggering 89.4 trillion won operating profit for the second quarter was almost single-handedly powered by its memory semiconductor division, a company official stated. This remarkable performance is attributed to the surging global demand for artificial intelligence (AI) hardware, which has led to a severe shortage and subsequent price increases for memory chips.

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It was all the semiconductors.

While the memory business soared, other divisions within Samsung faced substantial losses. The semiconductor (DS) division's non-memory businesses, including foundry and system LSI, are estimated to have lost between 2 and 3 trillion won. The finished products (DX) division also reported significant deficits, with the mobile (MX) business potentially losing over 1 trillion won and the visual display (VD) and home appliance (DA) units each incurring hundreds of billions of won in operating losses. Samsung is scheduled to release detailed segment results on July 30.

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Samsung Electronics, SK Hynix, and Micron, the three major memory manufacturers, will have an average operating profit margin of nearly 80% in the second quarter.

The memory division's astronomical profits stem from a sharp rise in the prices of DRAM and NAND flash memory, which increased by over 40% and 50% respectively in the second quarter compared to the previous one, according to investment banks like HSBC and Citigroup. Market research firm Counterpoint Research predicts that the average operating profit margin for the three major memory manufacturers, Samsung, SK Hynix, and Micron, will approach 80% in the second quarter.

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Currently, memory companies are supplying only about half of the market demand.

SK Hynix, whose memory business accounts for over 90% of its total revenue, is expected to see its operating profit jump sevenfold year-on-year to 63.2 trillion won. Analysts anticipate that the current memory shortage and high prices will persist into next year, as new semiconductor plants currently under construction will take time to come online. Professor Park Jae-geun of Hanyang University noted that memory companies are currently supplying only about half of the market's demand, and prices will only stabilize once new factories begin full-scale operations. Counterpoint Research also pointed out that the surge in memory prices, which is being passed on to consumers, has led to criticism that memory companies are pursuing excessive profits, potentially increasing regulatory pressure.

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There are also criticisms that memory companies are pursuing excessive profits, as the burden of soaring memory prices is passed on to consumers.