BY COMFORT OGBONNA
Samsung Electronics is expected to report a dramatic surge in profits for the first quarter of the year, fueled by skyrocketing demand for memory chips driven by the global boom in artificial intelligence technology. The South Korean tech giant is projected to deliver one of the strongest quarterly performances in its history, highlighting the powerful influence of AI investments on the semiconductor industry.
According to estimates compiled from 29 analysts by LSEG SmartEstimate, Samsung could announce operating profits of about 40.5 trillion won ($26.9 billion) for the January–March period. If confirmed, this would represent nearly a sixfold increase compared with the same quarter last year and would mark a record quarterly performance for the company. Revenue is also expected to rise sharply, climbing roughly 50% year over year, as the demand for advanced chips accelerates.
The expected earnings would bring Samsung close to matching the total operating profit it generated throughout the entire previous business year. In 2023, the world’s largest producer of memory chips recorded 43.6 trillion won in operating income, highlighting just how rapidly the industry has rebounded from last year’s downturn.
The surge in earnings is largely being driven by what industry experts describe as an “unprecedented supercycle” in memory chips. Artificial intelligence companies, cloud computing providers, and large technology firms are investing billions of dollars into AI infrastructure, data centers, and advanced computing systems. These systems rely heavily on high-performance memory chips such as DRAM and high-bandwidth memory, both of which Samsung produces at massive scale.
Some analysts believe Samsung’s results could even exceed current expectations. Financial services firm Citi, for example, predicts that operating profits could reach as high as 51 trillion won, reflecting the enormous momentum in the semiconductor market.
Industry analysts say the strength of the memory chip sector has created near-perfect conditions for Samsung. Ko Yeongmin, an analyst at Daol Investment & Securities, said the market environment for memory chip producers is extremely favorable, with demand continuing to outpace supply across multiple segments of the technology industry.
Despite the impressive outlook, investors are closely watching how geopolitical tensions could influence Samsung’s future growth. The ongoing conflict in the Middle East has raised concerns about rising energy costs and potential disruptions to supply chains for critical materials used in chip manufacturing. These risks could eventually affect the pace at which major technology companies invest in artificial intelligence infrastructure.
Large technology firms around the world have been pouring massive amounts of capital into AI development, but higher operating costs or supply chain disruptions could slow those investments. Any reduction in spending on data centers or AI computing power could eventually impact demand for memory chips.
Another concern for investors is the recent softening of spot prices for DRAM chips. Over the past few weeks, prices for these chips have shown signs of easing as manufacturers of smartphones, computers, and other electronic devices raise retail prices to offset higher component costs. Those price increases have begun to dampen consumer demand in certain markets.
Market sentiment has also been affected by new technology developments that could reduce memory usage in AI systems. Last month, Google introduced a memory-saving technology known as TurboQuant, designed to optimize how AI models store and process data. Innovations like this could eventually reduce the amount of memory required for AI workloads, potentially affecting long-term chip demand.
These factors have contributed to volatility in semiconductor stocks. Since the outbreak of the Middle East conflict on February 28, Samsung’s shares have declined about 14%, reflecting investor caution. However, despite the recent pullback, Samsung’s stock remains around 50% higher for the year, supported by massive global investment plans in artificial intelligence.
Many industry experts remain optimistic about the long-term outlook for memory chips, emphasizing that global supply remains far below demand. Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide, noted that while spot prices have cooled slightly in recent weeks, the overall market remains extremely tight.
According to Gonnerman, the current slowdown in pricing is likely temporary, as the backlog of orders from technology companies continues to grow. He added that it may take years before manufacturers can expand production enough to meet the full scale of global demand for advanced memory chips.
Market research firm TrendForce also expects memory prices to continue rising. The organization reported that conventional contract prices for DRAM chips doubled during the first quarter compared with the previous quarter. Prices are forecast to increase by another 58% to 63% during the April–June quarter, reflecting continued supply shortages.
Samsung executives are already taking steps to manage potential volatility in the chip market. Co-CEO Jun Young-hyun recently told shareholders that the company is working with major customers to shift toward long-term supply contracts lasting three to five years. These agreements are intended to provide stability for both Samsung and its customers by protecting them from sudden swings in demand or pricing.
While Samsung’s memory chip division is expected to generate the majority of its profits, other parts of the company may face more challenging conditions.
The company’s contract chip manufacturing business, which competes directly with Taiwan’s semiconductor giant TSMC, is expected to remain unprofitable for now. However, the division recently received a significant boost through a partnership with Nvidia that will involve producing advanced AI inference processors, potentially strengthening Samsung’s position in the growing AI hardware market.
Meanwhile, Samsung’s smartphone and display businesses may see weaker results in the first quarter. Analysts expect profits from these divisions to drop by roughly half, largely due to rising memory component costs and intense competition from rival smartphone manufacturers.
The company could also face internal pressures in the months ahead. Labor unions in South Korea have called for changes to Samsung’s employee bonus system and have warned that workers could launch a strike in May if negotiations fail. Rising labor costs and potential disruptions from labor action could add another layer of uncertainty for the company.
Even with these challenges, Samsung’s strong position in the global semiconductor market places it at the center of the AI revolution. As technology companies continue racing to develop more powerful artificial intelligence systems, demand for high-performance memory chips is expected to remain one of the most important drivers of growth in the global technology industry.