Two years ago, Samsung Electronics executives spent earnings calls explaining losses in the semiconductor division. On Thursday they confronted the opposite problem: how to describe a quarter so large it outpaced every forecast on the table.
The division booked 89.2 trillion won in operating profit for the second quarter, roughly $62 billion, a jump of more than 250 times from the same period a year earlier, Samsung said. Analysts had expected an average of 79.3 trillion won, according to estimates compiled before the release. Group-wide net profit of 71.27 trillion won also topped projections.
A year ago the same division earned a fraction of that total, roughly 0.36 trillion won, a near-breakeven performance that showed how far the memory cycle had fallen. The swing is the steepest in the company’s history and the clearest sign yet that the artificial-intelligence buildout has rewritten the economics of the chips that feed it.
The driver is memory pricing. Demand for high-bandwidth memory, the specialty chips stacked inside AI accelerators, and for the DDR5 memory that feeds servers has pushed DRAM and NAND prices higher for a fourth consecutive quarter, Samsung said. AI products now consume a large share of the industry’s advanced capacity, squeezing out supply for other buyers.
The pricing power is unusual for an industry long accustomed to treating memory as a commodity. AI accelerators use several times more memory than conventional server chips, and each new generation of processors has raised the requirement, according to chip analysts. That structural demand has drained supply from the broader market and lifted prices for nearly every type of DRAM.
Samsung entered the AI wave late. Its high-bandwidth memory took months to pass qualification at Nvidia, the dominant buyer of AI chips, and SK Hynix captured most of the early orders. Samsung has since closed the gap, shipping its latest memory products in volume and expanding capacity, according to people familiar with the matter.
The catch-up has been expensive. Samsung spent heavily to build the advanced packaging lines that high-bandwidth memory requires, and those costs suppressed profits in earlier quarters. This quarter the investment began to pay off, analysts said, as yields improved and volume ramped.
The results also reflect discipline across the memory industry. Suppliers including Samsung, SK Hynix and Micron Technology cut output during the last downturn and have signaled they will add capacity cautiously in the recovery, a departure from past booms when all three flooded the market and crashed prices. Buyers, scarred by shortages during the pandemic, have signed longer contracts, adding stability to pricing. Contract prices for DRAM have climbed steadily since late last year, according to industry data, and NAND has followed.
The memory boom is the mirror image of a crisis that nearly broke the industry. In 2023, Samsung’s semiconductor division posted its first annual loss since the 2008 financial crisis as PC and smartphone shipments collapsed. Rivals posted similar losses, capital spending was cut, and production lines were idled across the sector.
Now the same industry is struggling to keep up with demand. Hyperscale cloud providers are committing record sums to data centers, and Microsoft alone added more than $130 billion in new lease commitments in its fiscal fourth quarter, disclosed this week. Memory is ordered before servers are assembled, making memory makers the first beneficiaries of that spending.
Executives at Samsung say AI demand shows no sign of easing into the second half, and rivals have said the same. SK Hynix, the No. 2 memory maker, reports results next week, and Micron Technology, the largest U.S. memory maker, has said AI demand is outstripping supply.
Not everything at Samsung is booming. The company’s contract chipmaking business remains a drag, losing money even as Taiwan Semiconductor Manufacturing Co., the industry leader, reports record utilization. Samsung has spent years trying to win large foundry customers and has struggled to match TSMC’s technology lead, analysts said.
The contrast between a memory division printing money and a foundry unit losing it is the central tension for Samsung’s leadership. The split has fueled recurring speculation that the group might separate its contract manufacturing arm, a question executives have repeatedly declined to settle.
Risks are building alongside the profits. Memory pricing has revived expansion plans across the sector, and a sharp slowdown in AI capital spending, the scenario some investors began weighing after this week’s record lease disclosures, would hit memory makers first. The industry has weathered such reversals before, and the recoveries rarely last as long as the booms that follow them, analysts note.
For now, though, the cycle is running in Samsung’s favor. The 89.2 trillion won operating profit is a company record and a measure of how completely the AI buildout has changed the terms of the memory business. The question investors are asking is how long the change lasts.
