Samsung Electronics Q1 net surges over fivefold on AI-driven demand

Samsung Electronics Co. said Thursday its first-quarter net profit surged more than fivefold from a year earlier, driven by robust demand for high-end memory chips used in artificial intelligence (AI) applications.

Net profit for the three months ended March jumped to 47.22 trillion won (US$31.8 billion) from 8.22 trillion won a year earlier, the company said in a press release.

Operating profit jumped more than eightfold to 57.23 trillion won from 6.68 trillion won over the same period, while sales climbed 69.2 percent to 133.87 trillion won from 79.14 trillion won.

"The record quarterly operating profit and sales were primarily driven by robust sales of high-margin AI chips and rising memory prices in the device solutions division," the company said.

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A weaker won against the U.S. dollar contributed an additional 1.8 trillion won to operating profit, it added.

Looking ahead, the company expects solid performance in the second quarter, as continued heavy investment in AI infrastructure by global technology firms is likely to support memory chip prices.

Major tech companies, including Meta Platforms Inc. and Amazon.com Inc., have been ramping up spending on data centers and related hardware, boosting demand for AI chips.

To meet growing demand, Samsung Electronics began production of sixth-generation high bandwidth memory (HBM4) in February for the first time in the world. It plans to expand the supply of HBM4 in the second half.

"Production capacity for this year has already been fully booked, and HBM sales are expected to more than triple from a year earlier," said Kim Jae-june, executive vice president and head of the Global Sales & Marketing Office at Samsung Electronics, during an earnings conference call.

In the second quarter, the company said it plans to introduce samples of its next-generation HBM4E chips, as the memory supply is widely expected to remain tight relative to demand through 2027.

At its annual shareholders' meeting last month, Samsung Electronics said it would consider placing greater emphasis on securing multiyear contracts to help stabilize supply, noting that such deals could support pricing and provide a buffer against cyclical downturns.

"Customers concerned over potential supply shortages are already placing orders for next year, and these advance orders alone are expected to widen the supply-demand gap further compared with this year," Kim said.

However, the company faces the prospect of a general strike by its 75,380 unionized workers, who are demanding that 15 percent of annual operating profit be allocated for employee compensation each year.

The union has threatened to launch an 18-day general strike starting May 21 unless the company presents an acceptable performance-based pay framework.

Some analysts warn that a prolonged strike could materially disrupt chip production, while others say any impact would likely be limited due to the high level of automation in memory manufacturing facilities.

On Thursday, Samsung Electronics fell 2.43 percent to 220,500 won, underperforming the broader Korea Composite Stock Price Index's (KOSPI) 1.38 percent loss.

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