Samsung Electronics said it expects a notable increase in its first-quarter operating profit, surpassing expectations by over 10-fold.
The South Korean tech giant estimated its operating profit to have soared to a staggering 6.6 trillion won (USD 4.89 billion) for the quarter ending 31 March. This figure represents a 931 per cent increase compared to the same period last year when the company faced a severe downturn in chip demand.
While the operating profit exceeded projections, Samsung’s estimated the revenue fell slightly short of expectations. The company anticipated revenue to have increased by 11 per cent year-on-year to 71 trillion won, slightly below the forecasted 72.3 trillion won. Analysts attribute the higher operating profit to an improved inventory valuation of NAND flash chips and increased demand for such chips, which likely enhanced profit margins.
The positive reception of Samsung’s latest flagship smartphones, the Galaxy S24 series, may have also contributed to the strong performance. Analysts believe that sales of premium smartphones, particularly those featuring on-device AI capabilities, exceeded expectations, further boosting profits for the mobile division.
Samsung’s chip division, traditionally its biggest revenue driver, is expected to report its first quarterly profit in five quarters. This turnaround is attributed to the rebound in semiconductor prices, with DRAM chip prices rising approximately 20 per cent and NAND flash chip prices increasing by 23 per cent to 28 per cent during the first quarter.
However, the recent 7.2-magnitude earthquake in Taiwan is likely to tighten semiconductor supply, potentially leading to further price hikes by major chip manufacturers like Samsung. This situation could further bolster earnings in the second quarter.
Despite the positive financial results, Samsung shares experienced a slight decline in early morning trading, reflecting broader market trends. This decline may have been influenced by concerns raised by Federal Reserve officials about the need to manage interest rate cuts, impacting global market sentiment.
