As Apple Stares At First Revenue Drop In A Decade, Samsung Predicts Stellar 10-Fold Q1 Profits Amid Surging Chip Prices

As the tech industry navigates through a period of fluctuating chip prices, Samsung Electronics SSNLF has emerged with a forecast that signals a robust first-quarter performance, potentially setting a positive tone for its financial year. This comes at a time when Apple Inc. AAPL is anticipating a drop in its revenue for the first time in a decade.

What Happened: Samsung Electronics is expecting a significant increase in its first-quarter operating profit, with a projection exceeding 10 times the previous year’s figure, as chip prices see a recovery, Reuters reported on Friday.

The anticipated profit surge to 6.6 trillion won ($4.89 billion) marks the highest operating profit for the company since the third quarter of 2022, a 931% jump from the same quarter last year. This performance surpasses the 5.7 trillion won ($4.21 billion) LSEG SmartEstimate and comes amid a rebound in memory chip prices.

Meanwhile, Samsung’s American rival Apple expects its revenue and earnings per share (EPS) in the March 2024 quarter to drop for the first time in a decade due to declining iPhone sales. Analysts have pointed out that Apple's struggles in China are less about the company and involve a much bigger “geopolitical kerfuffle.”

Despite the positive guidance, Samsung shares fell by 1.3% early on Friday, reflecting a broader market decline. Investors remain cautious, awaiting further details on the company’s high-end memory chip business, which has been trailing behind its competitors.

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The rise in chip prices is attributed to a 20% increase in DRAM chip prices and a 23% to 28% hike in NAND flash chip prices from the previous quarter, as reported by TrendForce. The demand for memory chips, particularly for AI applications, has driven Samsung’s shares up by 34% over the past year, outperforming the broader market’s 10% gain.

Why It Matters: Samsung has lagged behind SK Hynix in the high-bandwidth memory (HBM) market for a long time. Moreover, the recent 7.2-magnitude earthquake in Taiwan may further tighten semiconductor supply, potentially leading to increased memory chip prices and boosting Samsung’s earnings in the second quarter.

Despite the drawbacks, the successful launch of the Galaxy S24 smartphones has likely contributed to a solid profit in Samsung’s mobile business, with an 8% increase in smartphone shipments and a 30% rise in the average selling price, according to Eugene Investment & Securities.

Samsung had previously pointed to Google as the source of touchscreen issues in its Galaxy S23 devices, deflecting concerns about hardware defects. Moreover, the company has been actively revamping its chip manufacturing technology to better compete in the AI chip market, as seen in its strategic update to align with industry leaders like Nvidia.

Samsung is set to release its detailed earnings on Apr. 30, providing a clearer picture of its financial performance and market position.

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