Why AI is Behind Samsung’s Expected 15-Fold Profit Surge

The AI boom and its associated drag is bringing the stock market and the companies involved with it on record rallies, and Samsung is no exception, with profits projected to increase 15-fold.

On 5 July, Samsung said its operating profit for the April–June quarter is projected to be around 10.4trn won (US$7.45bn), a staggering 1,452% increase from the 670bn won it achieved in 2023.

Samsung also anticipates revenue of between 73trn (US$52.7bn) and 75trn (US$54.1bn) won for the second quarter (Q2), an increase from its 2023 Q2 revenue of 60.01trn won (US$43bn).

This increase comes amid a frenzied market for AI chips. Driven by the rapid adoption of AI technologies across various industries, the sector has experienced a dramatic surge in both demand and price. 

AI chip titans like Nvidia are subsequently partnering with giants of their respective sectors, as they all look to integrate AI capabilities into their operations. Yet, the buck does not stop there.

Operating as auxiliaries to these AI chips is an array of memory chips, crucial to the operation of the AI abilities. 

Samsung’s chips 

Although you wouldn’t believe it based on the current focus on Nvidia, but Samsung is the world’s largest chip maker. 

Nvidia’s chips are designed for data centres and AI workloads, particularly for training and running complex AI models. With Samsung, however, it is largely on high-bandwidth memory (HBM) and DRAM chips, and some processors. 

Yet despite not being the one making headlines, these are essential components for AI applications. 

In fact, this profit is all the more impressive when considering the company posted record losses in 2023 as the industry emerged from the pandemic with low demand for electronics and memory chips.

By 2030, nearly 30% of the global chip market is predicted to be made up of AI 

chips, according to GlobalData. Memory chip prices have increased from approximately 13% to 18% in Q2 2023. 

Future growth in AI

Despite its strong position its chips play in AI, Samsung is seeking to gain a bigger share of the growth sector. 

In June, Samsung unveiled its AI Vision, with a big announcement that its contract manufacturing business would offer a one-stop shop for AI chips.

This innovative "Samsung AI Solutions" strategy, integrates the company's memory chip, foundry, and chip packaging services into a single, cohesive system. By consolidating multiple production phases under one communication channel, Samsung seeks to cut costs, and importantly, decrease delays in a bid to enhance its competitive edge and become market leader in AI chip delivery. 

Through this tactic, the chip manufacturer claimed it can create AI chips up to 20% faster by having clients working with a single channel of communication for all of the manufacturing teams at once.

It’s this push for AI delivery, alongside the growth in AI chips more generally and the associated memory needs they may require, mean Samsung is both positioned and positioning itself to seize the surges in profit associated with AI. 

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