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Samsung Electronics posted operating profit of nearly 90 trillion won in the second quarter, the highest in the industry after topping all global tech giants including Nvidia, setting an unprecedented record for a corporation worldwide. Excluding this year's surge in bonus costs, the company is understood to have effectively earned more than 100 trillion won on a normalized basis. Buoyed by continually rising demand for artificial intelligence (AI) memory, it is expected to usher in the era of 100 trillion won in quarterly operating profit in earnest in the second half.
Samsung Electronics disclosed on the 7th that its second-quarter operating profit was tentatively estimated at 89.4 trillion won. Increasing 18-fold from a year earlier, it set a record high for the third consecutive quarter, following 20.1 trillion won in the fourth quarter of last year and 57.2 trillion won in the first quarter of this year. Revenue also rose 129.3% from a year earlier to 171 trillion won.
Samsung Electronics achieved the highest quarterly operating profit among all tech companies not only in Korea but worldwide. Among global tech companies, Apple had held the top record with $50.85 billion (about 77.83 trillion won) in the fourth quarter of last year, followed by Nvidia with $53.5 billion (about 81.88 trillion won) in the February-April quarter this year.
With its earnings announcement that day, Samsung Electronics broke the record again. Samsung's second-quarter operating profit amounts to $58.4 billion at that day's exchange rate. Beyond the tech industry and across all companies worldwide, the only case exceeding Samsung Electronics' quarterly operating profit is the $86.5 billion posted by Saudi Arabia's state oil company Aramco in the second quarter of 2022.
As a result, Samsung Electronics earned operating profit of 146.6 trillion won in the first half of this year alone, up 1,186% from the first half of last year. With annual operating profit projected to reach 374 trillion won, it is observed that the company will comfortably surpass 100 trillion won per quarter and 200 trillion won on a half-year basis in the second half.
Also, since about 15 trillion won in bonus provisions was reflected in these second-quarter results, calculations suggest that on a normalized basis excluding this, second-quarter operating profit effectively exceeds 100 trillion won. Samsung Electronics plans to pay about 40 trillion won, equivalent to 10.5% of business performance, to employees in its device solutions (DS) division as a special management performance bonus this year. The funding for this bonus is prepared through the provisions.
This unprecedented growth was largely led by the DS division. Operating profit from the finished-goods (DX) division fell short of 1 trillion won, while DS is estimated to have earned more than 88 trillion won. In particular, considering that non-memory business units such as foundry (contract chip manufacturing) and System LSI were in the red, the memory business unit within the DS division earned virtually all of the operating profit. This resulted from demand and prices for memory, the core component, still soaring as competition among big tech firms including Nvidia to develop AI chips and build data centers intensified.
According to market research firm DRAMeXchange, the average price of DRAM (DDR4 8Gb 1Gx8 2133MHz) at the end of the second quarter this year was $21, eight times higher than a year earlier and up 61.5% from $13 at the end of the first quarter this year. NAND (128Gb 16Gx8 MLC) prices also recorded a similar rate of increase. Market research firm TrendForce projected that memory prices would rise around 10% in the third quarter compared with the second quarter.
Analysts also say memory is undergoing a transformation into a high-margin industry as the practice of long-term agreements (LTAs)—which supply steady volumes to customers while reducing the risk of price declines—spreads. In the second quarter this year, the LTA share of all supply contracts signed by Samsung Electronics was about 30%, the highest in the industry, ahead of competitors (20%). The LTA share is expected to continue expanding in the third quarter as well.
High-bandwidth memory (HBM), which had trailed SK Hynix, also recovered its growth trajectory and set out to chase market share. Samsung Electronics began mass-production shipments of sixth-generation HBM (HBM4)—to be mounted on Nvidia's new chip "Vera Rubin" in the second half of this year—for the first time in the world in February this year, and got off to a smooth start, reaching $1 billion (about 1.53 trillion won) in revenue within four months.
Following facilities in Pyeongtaek, Yongin, and Taylor in the United States, Samsung Electronics recently decided to build a 400 trillion won semiconductor fab in Gwangju, South Jeolla Province, as part of the government's "mega project," strengthening its leadership in global memory supply. In foundry (contract chip manufacturing) as well, it is seeking to improve earnings by successively pursuing orders to produce big tech firms' own chips (ASICs) for Tesla, Apple, Meta, and Anthropic.
By contrast, DX continues to struggle, with its Visual Display (VD) and Consumer Electronics (CE) business units estimated to have posted operating profit of around zero in the second quarter this year. Samsung Electronics' TV and home appliance businesses are suffering weak earnings due to declining global demand and rising raw material costs, compounded by the pursuit of Chinese companies. In May this year, it announced withdrawal from the home appliance sales business in China. The Mobile eXperience (MX) division, which sells smartphones, also faces inevitable declines in price competitiveness and shipments amid the fallout from chipflation (a surge in memory prices).
To overcome the slump, the DX division plans to unveil new form factors—including its new "Galaxy Z8" series, which adds a 4:3 ratio passport-type foldable phone, and AI glasses (eyewear-type devices)—late this month to secure new markets.
The company is also staking its future on entering new businesses such as AI and robotics. Samsung Electronics decided to build a physical AI hub in Gumi, North Gyeongsang Province, including a 19 trillion won humanoid robot mass-production line. The DX division plans to invest about 350 trillion won by 2040 to secure future growth engines.
Samsung Electronics plans to convert all its production plants at home and abroad into "AI autonomous factories" by 2030. It will introduce digital twin-based simulation across all processes, from material receipt to production and shipment, and will gradually deploy AI agents for quality, production, and logistics, along with humanoid manufacturing robots such as operating bots, logistics bots, and assembly bots.
