Analysts expect Samsung’s best quarterly profit since 2018 on soaring DRAM prices

Samsung Electronics is getting ready to announce a sharp jump in profits for the last three months of the year, and it’s all thanks to a serious shortage of memory chips that’s pushed prices way up.

The South Korean tech company is looking at a 160% increase in operating profit for October through December, according to analysts who follow the company. Chipmakers have been moving production toward processors built for artificial intelligence, and that’s created tight supplies of regular memory chips. Meanwhile, demand keeps growing for both kinds.

Analysts predict record quarterly results

Analysts think Samsung will post an operating profit of 16.9 trillion won, that’s roughly $11.7 billion, for the quarter. This estimate comes from 31 analysts who track the industry, with more weight given to those who have a proven track record of accurate predictions. Last year, during the same period, the company made 6.49 trillion won.

If things unfold as expected, this would be Samsung’s best quarter since the middle of 2018, when it achieved 17.6 trillion won. Some analysts recently bumped up their predictions even more. They’re now saying profits might top 20 trillion won because chip prices went up faster than anyone thought they would.

Samsung will release its preliminary numbers on Thursday.

DDR5 DRAM chips saw prices shoot up 314% in the fourth quarter versus the year before, based on data from TrendForce, a research firm. They’re predicting conventional DRAM prices will go up another 55% to 60% this quarter.

Avril Wu, who analyzes the market for TrendForce, explained why this matters for Samsung. “As conventional DRAM prices continue to surge, Samsung – whose production capacity is largely concentrated in this segment – stands to gain relatively more from the current price upcycle,” she said.

Company makes a comeback after a difficult year

This profit boom is quite a change for Samsung. CEO Jun Young-hyun had to publicly apologize for poor financial performance a little more than a year ago. The company was losing ground to SK Hynix, another Korean firm, in getting advanced chips to Nvidia, which dominates the AI processor market.

Investors liked what they saw in Samsung’s comeback. The stock jumped 125% last year, the biggest yearly gain in 26 years. But shares fell 2.1% Tuesday morning while the overall market dipped 0.2%. People were taking a breather after the recent run-up.

Last Friday, Jun talked about how Samsung’s doing with its next-generation high-bandwidth memory chips, called HBM4. He said customers liked what they saw and were telling them, “Samsung is back.” That helped push the stock to record highs lately.

Jun didn’t say which customers he meant, but analysts think Samsung is finally making progress getting chips to Nvidia. That would mean taking some business from SK Hynix and Micron. Nvidia CEO Jensen Huang said Monday that the next generation of chips is in full production now. The Vera Rubin platform will use HBM4 chips and should come out later this year.

Analysts expect Samsung’s operating profit to more than double this year to over 100 trillion won. Rising chip prices should make up for slower growth in the phone business.

However, not everyone is optimistic. BNK Investment & Securities’ Lee Min-hee is currently cautious about Samsung’s valuation. He believes that the market for PCs and cellphones could be negatively impacted by rising chip prices. Additionally, he noted that there is a chance that demand for AI data centers would decline, particularly because many are using debt to fund their investments.

The chip shortage, helping Samsung’s semiconductor business, is causing headaches for its smartphone division, which brings in the second-most revenue. Higher chip costs are eating into profit margins there.

TM Roh, Samsung’s co-CEO who runs the mobile, TV, and home appliance businesses, talked to Reuters about it. “As this situation is unprecedented, no company is immune to its impact,” he said. They’re trying to minimize the damage, but it looks like there’s no way around it.

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