Memory chips and smartphones help Samsung report strong first quarter earnings
Earlier this month, we told you that Samsung was about to report its largest quarterly profit in a year and a half. On Tuesday (in South Korea), the company reported a spectacular 932.8% jump in operating profit for the first quarter year-over-year. While you might know of Samsung because of its Galaxy handsets, the company is the world's largest maker of memory chips and thanks to AI, Samsung's memory chip business is booming.
During the quarter, Samsung took in 71.92 trillion Korean won ($52.3 billion) in revenue, 12.81% more than revenue it generated during the 2023 first quarter. It also topped estimates of 71.04 trillion Korean won. The operating profits came to 6.61 trillion Korean won ($4.8 billion) topping estimates of 5.94 trillion Korean won. Net profit rose 9.4% to 6.75 trillion Korean won ($4.9 billion). Earnings per share for Q1 rose to 975 Korean won per share (.71 US) from 206 the year before.
Samsung reports a strong turnaround during the first quarter of 2024
It's quite a turnaround for Samsung following record-setting losses last year which were blamed on a drop in demand during the post-Covid period. Samsung said that Galaxy AI features in the Galaxy S24 flagship line helped contribute to strong sales for the series. During the quarter, Samsung's smartphone sales rose, and profitability growth was in the double digits percentage-wise despite higher component prices. Samsung says that applying Galaxy AI to other phones besides the Galaxy S24 series will increase smartphone sales this year as will improvements in the user experiences reported by those owning foldable phones.
Samsung Display had a rough first quarter due to weak seasonality and tough competition. Samsung expects moderate growth for its Display unit thanks to the rising OLED penetration rate. The company hopes to keep this rate growing by continuing to reduce the costs of producing OLED screens. Continuing to lower the production cost of OLED panels could help OLED take the place of more LCD screens in the rigid display smartphone market.
Samsung Foundry reduced its losses during Q1 and its order backlog reached a record during Q1. It hopes to complete the development of its 2nm process node this year while mass-producing chips using its second-generation 3nm node later this year. Samsung's semiconductor unit will join everyone on this planet and recognize AI as a major growth opportunity this year.
The unit that produces smartphones saw sales rise 5% to 33.53 trillion Korean won ($24.4 billion) while profits declined 44% on an annual basis to 3.51 trillion Korean won ($2.5 billion). The company's memory chip business went from a 4.58 trillion won loss in Q1 last year and a 2.18 trillion Korean won loss during last year's Q4 to return to profitability with a profit of 1.91 trillion won ($1.4 billion) during the first quarter of this year.
In a statement made on Tuesday, Samsung said, "The company posted KRW 71.92 trillion in consolidated revenue on the back of strong sales of flagship Galaxy S24 smartphones and higher prices for memory semiconductors. Operating profit increased to KRW 6.61 trillion as the Memory Business returned to profit by addressing demand for high value-added products."
The strong first quarter report led the stock to rise 1,200 Korean won on Tuesday, or 1.56% to 77,900 Korean won ($56.56).
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