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Samsung operating profit surges after chip prices rebound

Samsung Electronics expects first-quarter operating profit to surge 931% due to a strong rebound in chip prices.

On Friday (April 5), the company released a preliminary statement detailing a nearly tenfold increase in operating profit from the same period last year. Profits soared to 6.6 trillion won ($4.89 billion) from January to March 2024, a sharp increase from 0.64 trillion won in the first quarter of 2023.

Samsung is the world’s largest maker of a variety of random-access memory (RAM) chips commonly found in consumer devices such as smartphones and computers.

As the downcycle in the semiconductor market officially begins, the South Korean multinational’s CEOs will be pleased with the turnaround after a sharp drop in operating profit a year ago.

Samsung’s outlook is positive

The positive update comes as the United States is providing Samsung with more than $6 billion in funding from the Chips and Science Act of 2022 to expand the company’s operations in the country. The company already has a sizable presence in Austin, and a new strategic $17 billion plant will be built in Tyler, also in the Lone Star State.

Samsung’s main competitors are Intel and Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chip maker. Both companies will also benefit from U.S. government investment to produce most of their chips in the states.

That won’t dampen the fierce rivalry between the two companies, as Intel last month became the top earner in semiconductor manufacturing, displacing Samsung from the top spot.

Meanwhile, Japanese investment bank Daiwa Securities predicts Samsung’s prospects are encouraging and supports its turnaround until 2024.

Daiwa analyst and executive director SK Kim said in a report on March 27, “We forecast Samsung Electronics to post solid earnings in 1Q24, driven by rising memory prices and strong S24 sales, Exceeded market expectations.”

“We expect a strong AI-driven memory recovery cycle to drive earnings growth in 2024-25,” Kim added.

Samsung Electronics is expected to provide a full breakdown of detailed earnings later this month.

Image credit: Omar Markhieh/Pexels

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