Seoul: Samsung Electronics Co. announced Thursday that its first-quarter net profit surged more than fivefold from the previous year, propelled by strong demand for high-end memory chips used in artificial intelligence (AI) applications. The net profit for the three months ending in March soared to 47.22 trillion won (US$31.8 billion), a significant increase from 8.22 trillion won recorded a year ago, according to the company's press release.
According to Yonhap News Agency, the company's operating profit experienced an over eightfold increase, reaching 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. Samsung attributed these record figures to robust sales of high-margin AI chips and rising memory prices within its device solutions division. Additionally, a weaker won against the U.S. dollar contributed an extra 1.8 trillion won to operating profit.
Looking forward, Samsung expects solid results in the second quarter, supported by continued heavy investment in AI infrastructure by global tech firms, likely bolstering memory chip prices. Major technology companies, such as Meta Platforms Inc. and Amazon.com Inc., have been increasing their spending on data centers and related hardware, thereby boosting demand for AI chips.
To cater to this growing demand, Samsung Electronics commenced production of sixth-generation high bandwidth memory (HBM4) in February, marking a global first. The company plans to expand the supply of HBM4 in the latter half of the year. Kim Jae-june, executive vice president and head of the Global Sales and Marketing Office at Samsung Electronics, stated during an earnings call that production capacity for the year has already been fully booked, with HBM sales expected to more than triple from the previous year.
In the upcoming second quarter, Samsung intends to introduce samples of its next-generation HBM4E chips, as the memory supply is widely anticipated to remain tight compared to demand through 2027. At its recent annual shareholders' meeting, Samsung highlighted its consideration of securing multiyear contracts to stabilize supply, which could support pricing and mitigate cyclical downturns. Kim noted that advance orders for next year are already being placed by customers concerned about potential supply shortages, which may further widen the supply-demand gap.
However, Samsung faces a potential challenge from a looming general strike by its 75,380 unionized workers, who demand that 15 percent of annual operating profit be allocated to employee compensation each year. The union has warned of an 18-day general strike starting May 21 if the company fails to provide an acceptable performance-based pay framework.
While some analysts caution that a prolonged strike could significantly disrupt chip production, others suggest that the impact may be minimal due to the high level of automation in memory manufacturing facilities. On Thursday, Samsung Electronics shares fell 2.43 percent to 220,500 won, underperforming the broader Korea Composite Stock Price Index's (KOSPI) 1.38 percent loss.