By Hyunjoo Jin
SEOUL, April 3 (Reuters) – Samsung Electronics, which is benefiting from rising chip prices fueled by the rise of artificial intelligence, is expected to post a six-fold increase in operating profit between January and March, a quarterly record and just shy of what it earned for the entire last business year.
Driven by what it calls an “unprecedented supercycle” for memory chips, Samsung is expected to post a profit of 40.5 trillion won ($26.9 billion) on Tuesday on a 50% rise in revenue, according to an LSEG SmartEstimate compiled by 29 analysts.
By comparison, last year, the world’s largest memory chip maker posted 43.6 trillion won in operating income.
Some analysts are even more optimistic: Citi, for example, forecasts 51 trillion won.
“You can’t ask for things to be better,” said Ko Yeongmin, an analyst at Daol Investment & Securities, referring to the strength of the memory chip market.
WINDS AGAINST WAR
Despite the huge expected rise in profits, investors are likely to focus on any clues about the extent to which the war in the Middle East could affect Samsung’s growth momentum.
Samsung, however, typically doesn’t say much about its outlook until it offers a more detailed earnings breakdown due out later this month.
The war has raised energy costs and threatens to disrupt the supply of key production materials, which in turn may force big tech companies to reduce their investments in artificial intelligence data centers.
There have also been some signs of a decline in spot prices for DRAM (dynamic random access memory) chips, as device makers have raised prices for smartphones, computers and other products, hurting consumer demand.
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These concerns, as well as the introduction of Google’s memory-saving technology called TurboQuant last month, have contributed to a sell-off in memory chip stocks, with Samsung shares losing 14% since the war began on February 28.
That said, the stock is still up 50% this year, boosted by Big Tech AI investment plans worth hundreds of billions of dollars.
BUT THERE IS STILL A CHIP SHORTAGE
Some experts are optimistic about the outlook, noting that there is a serious shortage of memory chips.
“We’ve seen a cooldown (in memory chip spot prices) over the last 3 or 4 weeks, yes. We think it’s temporary,” said Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide.
“Demand and backorders remain strong,” he said, adding that it would be a long time before memory manufacturing could meet full demand.