Samsung Eyes 160% Q4 Profit Jump Amid Soaring AI Chip Prices
Samsung Electronics is expected to report a sharp rise in fourth-quarter operating profit. Analysts forecast a jump of about 160% compared with a year earlier. This surge follows a severe global chip shortage. As a result, memory prices have climbed rapidly amid booming demand for artificial intelligence.
In recent months, semiconductor prices have surged. Meanwhile, the industry’s pivot toward AI-related chips has reduced output of traditional memory. At the same time, demand has increased for both conventional and advanced chips used to train and run AI models. Consequently, supply constraints have intensified across key memory segments.
Estimates point to multi-year high
According to analyst estimates, operating profit for the October-to-December period is expected to reach around 16.9 trillion won. This compares with about 6.5 trillion won a year earlier. Moreover, it would represent the highest quarterly profit since the third quarter of 2018. Some analysts have gone further. In fact, they now expect operating profit to exceed 20 trillion won, driven by stronger-than-anticipated memory chip prices.
The company is set to announce preliminary revenue and operating profit figures later this week. Therefore, markets are closely watching the release for confirmation of the profit rebound.
Soaring memory prices reshape outlook
Memory chip prices have risen sharply over the past year. For instance, prices of certain DDR5 DRAM chips jumped more than 300% in the fourth quarter from a year earlier. In addition, conventional DRAM contract prices are expected to rise further in the current quarter. As conventional DRAM prices continue to surge, Samsung – whose production capacity is largely concentrated in this segment – stands to gain relatively more from the current price upcycle.
This profit rebound marks a dramatic turnaround from last year. At that time, the company struggled as it lagged rivals in supplying high-end chips for AI processors. However, progress in next-generation high-bandwidth memory has improved its competitive position. On Friday, Jun said Samsung customers have praised the competitive edge of its next-generation high-bandwidth memory (HBM) chips, or HBM4, quoting them as saying, “Samsung is back,” which helped extend a rally in Samsung’s shares to record highs in recent sessions.
Looking ahead, analysts expect operating profit to more than double this year, potentially exceeding 100 trillion won. Nevertheless, some remain cautious. Lee Min-hee, an analyst at BNK Investment & Securities, said he was wary of Samsung’s valuations, as surging chip prices may sap demand for PCs and smartphones, and cited “risks of a demand slowdown” for AI data centres increasingly relying on debt to finance investments.
While the global memory chip shortage benefits the semiconductor business, rising chip prices are also pressuring other divisions. “As this situation is unprecedented, no company is immune to its impact,” Samsung co-CEO TM Roh, who oversees Samsung’s mobile, TV and home appliance businesses, told Reuters, adding it is trying to minimise the impact, which looks “inevitable”.
