Samsung alerts finish to chip downturn with forecast 10-fold soar in revenue

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.Samsung Electronics expects to publish a 10-fold soar in first-quarter working revenue as reminiscence chip costs stage a powerful restoration after the trade’s worst downturn in a long time final yr.The world’s largest maker of reminiscence chips by gross sales estimated on Friday that working revenue surged 931 per cent to Won6.6tn ($4.9bn) in preliminary numbers for the primary three months of this yr. That was higher than analysts’ expectations of Won5.7tn, in response to LSEG SmartEstimates. Gross sales rose 11.4 per cent to Won71tn from a yr earlier.The upbeat estimates mark Samsung’s highest earnings for the reason that third quarter of 2022 as its chip division is more likely to publish its first revenue in 5 quarters. Samsung shares have been buying and selling 0.7 per cent decrease on Friday morning after rising about 30 per cent over the previous yr. Detailed outcomes will likely be introduced on the finish of the month.Manufacturing cuts by main producers and powerful demand for high-performance chips amid a synthetic intelligence increase buoyed chip costs. Dram reminiscence chip costs rose about 20 per cent within the first quarter, whereas these of Nand flash reminiscence chips, used for information storage, gained 23-28 per cent, in response to information supplier TrendForce.Analysts forecast Samsung’s chip division will publish an working revenue of about Won900bn within the first quarter, in contrast with an working lack of Won2.2tn within the December quarter.“We’re seeing a stronger than anticipated restoration within the reminiscence cycle, with the next than anticipated rise in reminiscence chip costs,” mentioned Roko Kim, an analyst at Hana Monetary Funding. “It will likely be a yr of most Dram earnings with surging Nand costs.”The $160bn reminiscence chip market restoration was highlighted by Micron’s robust gross sales forecast final month, with the US chipmaker predicting report gross sales in 2025. Samsung shares have additionally been buoyed by easing concern over its competitiveness in excessive bandwidth reminiscence (HBM), after Nvidia chief Jensen Huang mentioned final month that his firm was within the strategy of qualifying Samsung’s new HBM chips for its graphics processing models.Samsung is attempting exhausting to meet up with rivals within the high-margin chips utilized in AI because it has trailed home rival SK Hynix in mass-producing essentially the most superior HBM chips.Kyung Kye-hyun, the corporate’s chief government answerable for its chip enterprise, mentioned final month that Samsung was near claiming management in HBM chips. He additionally informed a shareholder assembly that the corporate anticipated greater than $100mn of income from its superior chip packaging enterprise this yr.“Samsung is making progress within the HBM enterprise, which has been seen as its Achilles heel,” mentioned Lee Seung-woo, an analyst at Eugene Funding & Securities.RecommendedLee added that Samsung’s lossmaking chip foundry enterprise was nonetheless weighing on the corporate’s earnings, however he anticipated the contract manufacturing division to show worthwhile within the second half of this yr.Samsung, which is constructing a foundry in Texas, is predicted to obtain at the very least $5bn in grants from the US, whereas home rival SK Hynix is investing about $4bn in a complicated AI chip packaging plant in Indiana.Samsung’s robust earnings have additionally been pushed by sturdy gross sales of its newest AI-driven smartphones. The corporate in January launched its Galaxy S24 Android phones able to working generative synthetic intelligence options “on-device”, serving to Samsung to regain the highest spot in international smartphone gross sales in February.

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