Samsung Electronics is expecting a significant increase in first quarter operating profit of 931%, reaching 6.6 trillion Korean won. This surge in profit is attributed to the rebound in chip prices. Analysts at Daiwa Securities predict that Samsung will exceed market estimates due to memory price hikes and robust sales of the S24. They believe that the strong AI-driven memory upturn cycle will continue to drive earnings in 2024-25. As a result, Daiwa maintained their “buy” rating on Samsung Electronics and increased their price target to 110,000 won.
In addition to the remarkable increase in operating profit, first quarter revenue is expected to rise by 11.4% to 71 trillion won from the same period a year ago. Experts at LSEG anticipate revenue of 71.8 trillion won. This positive outlook is driven by Samsung’s position as the world’s largest maker of dynamic random-access memory chips. These chips are commonly used in consumer devices like smartphones and computers. The significant rise in revenue and profit is a stark contrast to the challenges faced in the previous year when memory chip prices plummeted due to excess inventories after the Covid pandemic, impacting demand for products like smartphones and laptops.
The global foundry industry experienced a sequential increase of around 10% in revenue during the fourth quarter, according to Counterpoint Research’s Foundry Services. However, on a year-on-year basis, revenue declined by 3.5% during the same period. Despite this, Counterpoint Research noted that the industry showed signs of improvement in the second half of 2023 as demand for supply chain inventory restocking in the smartphone and PC sectors increased. Samsung and SK Hynix both indicated in their third-quarter earnings calls that chip demand weakness had bottomed out following production cuts, pointing towards a potential recovery in the market.
Samsung Electronics is expected to release detailed earnings later this month, providing a more comprehensive view of their performance in the first quarter of 2024. The positive projections for both profit and revenue signal a strong start to the year for the tech giant. With memory chip prices rebounding and solid sales of their latest products, Samsung is poised to continue its upward trajectory. The company’s focus on innovation and adapting to market trends has positioned them well for future success in the ever-evolving tech industry.
