Samsung Electronics is expected to report a 160% jump in its fourth-quarter operating profit, driven by a severe shortage of processor chips and rising memory prices, as demand for artificial intelligence increases.
LSEG SmartEstimate estimates that Samsung's operating profit could reach 16.9 trillion won ($11.7 billion) for the October-December period, compared to 6.49 trillion won during the same period last year, the highest quarterly profit since the third quarter of 2018.
DDR5 DRAM chip prices have seen a significant increase of 314% year-over-year, according to TrendForce data, while the firm predicts that traditional DRAM contract prices will rise by 55% to 60% this quarter. Avril Wu, an analyst at TrendForce, stated, With traditional DRAM prices continuing to climb, Samsung stands to benefit the most from the current price cycle.
The rise in chip prices is a big opportunity for Samsung to boost its operating profits, but at the same time it worries some analysts about its impact on demand for smartphones and computers, as higher costs could slow consumer purchases.
Samsung had previously fallen behind in supplying advanced chips to Nvidia, impacting its business, but the new generation of HBM4 chips demonstrates a significant improvement in competitiveness. This has been reflected in Samsung's share price, which surged 125% last year, marking its biggest annual gain in 26 years, despite a slight dip of 2.1% on Tuesday morning after a sustained rise in recent trading sessions.
This jump in operating profit reflects Samsung’s ability to capitalize on the global shortage of memory chips and confirms its leading position in the semiconductor industry, with the potential to boost its market share at the expense of competitors such as SK Hynix and Micron, particularly in the artificial intelligence and data server chip sector.
Samsung's projected profit growth stems from the company's ability to capitalize on global supply shortages and rising chip prices, strengthening its position in the global semiconductor market. With continued demand for artificial intelligence, the company is expected to maintain its record-breaking operating profit performance in the coming period.
