Samsung Electronics Q1 chip profit jumps almost 50-fold, sees robust AI demand

Seoul: Samsung Electronics on Thursday reported record quarterly profit driven by a 49-fold jump in chip income, saying it expects the momentum to continue as clients spend on AI infrastructure and drive up prices of its memory chips. The world's top memory chipmaker by sales also said it has signed multi-year binding contracts with customers hoping to lock in supplies, without disclosing identities or terms. A boom in the construction of AI data centres has spurred Samsung and chipmaking peers to allocate production capacity to advanced chips that Nvidia uses in its so-called AI accelerators, squeezing the supply of more conventional chips. Samsung said it "expects server memory demand to remain strong as hyperscalers accommodate enterprises' increasing adoption of AI" and large language model services. It also expects agentic AI - AI that operates autonomously - "to accelerate growth in demand" in the second half of this year. A day earlier, US technology majors including Alphabet , Amazon and Microsoft all signalled sustained AI spending. Revealing the extent of the AI boom, Samsung said January-March operating profit in its cash cow chip division reached a record 53.7 trillion won ($36.15 billion) from just 1.1 trillion won in the same period a year earlier. That accounted for 94% of the quarter's 57.2 trillion won record total. That figure matched Samsung's estimate announced earlier this month and compared to 6.69 trillion won a year prior. Overall revenue rose 69% on year to 133.9 trillion won. Shares of Samsung slipped 0.2% after rising as much as 1.8% after the earnings announcement. The stock has surged 88% this year, outstripping the broader market's 59% gain. Narrowing the gap with SK Hynix Samsung has been trying to narrow the gap with compatriot SK Hynix in supplying high bandwidth memory (HBM) chips to Nvidia, having fallen behind to the detriment of both profit and share price. SK Hynix last week reported a quarterly profit record with a fivefold jump in earnings and forecast a prolonged chip industry boom, downplaying any concern about profit margins for chips nearing their peak. On Thursday, Samsung said it has started the industry's first mass-production sales of HBM4 chips for Nvidia's Vera Rubin platform. It also said it expects to increase capital expenditure sharply this year to meet AI demand. Still, it is bracing for potential production disruption as unions representing the majority of its workers in South Korea, especially in its chip division, consider striking over pay. Samsung said it "plans to respond to the fullest extent through a dedicated organisation and response system to ensure that production is not disrupted." Chip prices hit mobile earnings Rising prices of conventional chips dragged on Samsung's other businesses such as mobile phones, displays. Samsung said its mobile and network division will see profitability decline this year, weighed down by rising component costs. Profit in the division fell 35% in the first quarter to 2.8 trillion won. Its display division, which supplies flat-screen displays for customers such as Apple, saw operating profit fall 20% to 400 billion won. "While demand for semiconductors is set to increase due to the growth of the AI industry, a conflicting business environment is anticipated as the cost of IT products rises," Samsung said in a statement.