Soaring Semiconductor Prices Drive 89.4 Trillion Won... Samsung Electronics Nears Annual Operating Profit Breakthrough of 350 Trillion Won

AI Data Center Expansion Drives Surging Memory Demand
Higher Selling Prices Lead to Strong Performance
Ongoing Supply Shortages Expected to Boost Results Further in Second Half
Non-Memory and Finished Goods Weakness Remains a Key Variable

Samsung Electronics' strong performance in the second quarter of this year was driven by a sharp surge in memory semiconductor prices, fueled by increased investments in artificial intelligence (AI). As major global big tech companies rushed to expand their data centers, demand for memory soared, but supply could not keep pace, resulting in soaring selling prices and a snowballing increase in profits. With the price uptrend expected to continue in the second half, securities analysts are forecasting that the company's annual operating profit this year will exceed 350 trillion won for the first time ever, potentially reaching as high as 360 trillion won. This is a profit level the company has never reached since its founding. However, the company still faces challenges, such as its profit structure being heavily skewed toward semiconductors and sluggish performance in its finished goods businesses.

Prices, Not Volume, Drove the Surge

According to the securities and electronics industries on July 7, it is estimated that most of Samsung Electronics' second-quarter operating profit—about 89 trillion won—was generated by its Device Solutions (DS) division, which is responsible for the semiconductor business. As global AI investments ramped up, memory demand surged, but it takes time to build factories and increase shipments, causing a prolonged supply shortage.

This means the strong performance was due more to higher selling prices than to increased sales volume. In fact, market sources indicate that in the second quarter of this year, the selling prices of DRAM and NAND flash rose by more than 40% and 60%, respectively, compared to the previous quarter. Notably, Samsung Electronics aggressively led pricing policies, setting higher prices than competitors and maximizing profitability.

Kim Dongwon, Head of Research at KB Securities, analyzed, "While demand driven by AI proliferation is rising rapidly, capacity expansion remains stagnant, and it will take at least two more years to resolve the supply shortage."

Samsung Electronics headquarters in Suwon, Gyeonggi Province. Photo by Yonhap News Agency

"The Second Half Will Be Even More Impressive"... Annual Profit Expected to Surpass 350 Trillion Won

There is widespread consensus that this record will be broken again in the second half of the year. This is because the company has already covered all its incentive provisions in the second quarter, and DRAM and NAND prices are expected to continue rising through the end of the year. The industry expects memory selling prices to rise by an additional 15–20% in the third quarter.

Furthermore, the growing share of next-generation High Bandwidth Memory (HBM)4 is expected to create additional synergy, with profit momentum forecast to strengthen to 110 trillion won in the third quarter and 120 trillion won in the fourth quarter. Son Injune, a researcher at Eugene Investment & Securities, noted, "Negotiations are underway for average selling prices (ASP) of general-purpose DRAM and NAND to increase by more than 20% compared to the previous quarter in Q3," adding, "This has significant upside potential to keep raising performance estimates through next year."

Kim Sunwoo, a researcher at Meritz Securities, also pointed out, "A severe shortage of cleanroom space for semiconductor production will intensify the supply shortage through the end of next year," and noted, "Major cloud service providers such as Google and Amazon are actively pursuing long-term supply agreements (LTA) and business partnerships in various ways to secure memory ahead of year-end."

As a result, major securities firms are all raising their annual operating profit estimates for Samsung Electronics this year to over 350 trillion won, including 360 trillion won (iM Securities), 361.3 trillion won (Eugene Investment & Securities), and 366.4 trillion won (Kyobo Securities).

DX and Non-Memory Businesses Remain a Challenge

Behind the stellar results lies the unresolved challenge of extreme "memory concentration." Within semiconductors, non-memory businesses such as foundry (semiconductor contract manufacturing) and system LSI have been narrowing operating losses by increasing the utilization rate of advanced processes, but they still remain in the red, and a turnaround to profit within the year remains uncertain.

The Device eXperience (DX) division, responsible for finished products such as smartphones and home appliances, is facing an even more serious situation. The Mobile eXperience (MX) division, in particular, is now facing the possibility of posting a quarterly loss for the first time ever, as the surge in semiconductor prices has led to a significant increase in component costs. The Domestic Appliances (DA) and Visual Display (VD) businesses are also estimated to have returned to losses after just one quarter of profitability.

Kim Sunwoo, a researcher at Meritz Securities, noted, "From this quarter onward, the performance of business units outside of semiconductors has started to diverge sharply," adding, "For the DX division, as the proportion of component costs rises sharply, it will inevitably transform into a 'durable goods' business—meaning raising prices will lead to reduced sales volume in the future."

This content was produced with the assistance of AI translation services.