Volkswacht Bodensee - Samsung expects 1,800% operating profit leap on AI boom

The world's largest memory chipmaker estimated April-June operating profit at 89.4 trillion won ($58.4 billion) -- up 1,810 percent on-year, a company statement said.

Frenzied global demand for advanced memory chips used in data centres for artificial intelligence has already helped South Korean semiconductor giants post record profits this year.

The boom has also strengthened workers' demands for higher pay, and Samsung avoided a major strike in May after reaching an agreement on bonuses.

Samsung's estimate would be the "largest quarterly operating profit in history", beating that of AI chip titan Nvidia, said Kim Dae-jong, a business administration professor at Sejong University.

"If it can sustain this level of performance, Samsung could become the world's leading manufacturing company," he told AFP.

But Samsung shares fell seven percent in morning trade, with Seoul's benchmark Kospi index also tumbling.

The key question going forward is "how long memory demand will last. Demand is essentially secured through next year, but beyond that, no one really knows," Kim said.

- New chip hub -

Tuesday's estimate beat market forecasts by 6.2 percent, according to South Korea's Yonhap News Agency, citing its own data firm.

Revenue likely rose 129 percent to 171 trillion won, Samsung said. The company is due to release its final earnings report at the end of the month.

Samsung and domestic rival SK hynix are involved in a public-private investment of 800 trillion won to build a new chip fabrication hub in the country's southwest.

Kim said it was uncertain whether "Samsung will be able to maintain earnings at their current level" while this factory cluster is built.

Some analysts see potential delays to AI infrastructure investment as the biggest risk to the current memory boom.

But MS Hwang, analyst at Counterpoint Research, said he did not see "evidence that the gap between suppliers' production capacity and customers' demand is narrowing".

"While some data centre projects associated with less competitive players may be delayed, it would be an exaggeration to interpret this as a broad slowdown in AI infrastructure investment," he told AFP.

As chipmakers prioritize the lucrative AI industry, they have been reducing output of less flashy chips used in everyday consumer electronics like phones and laptops, pushing up device prices.

- Tax windfall -

South Korea's AI semiconductor boom has also fuelled debate over what the country should do with the increase in tax revenue created by the success of Samsung Electronics and SK hynix.

Presidential chief of staff Kang Hoon-sik said Sunday that the tax windfall would help finance large-scale projects focused on AI and the semiconductor industry.

It would also help to support young people in accessing housing, founding startups and finding jobs, he added.

An image of an SK hynix jacket went viral online this year as a symbol of wealth and success, with parody posts depicting it as a "golden ticket" to luxury boutiques or better dating prospects.

Jobs at Samsung and SK hynix now guarantee "a boost in marriage market value", Yonhap reported, citing a rise in their "desirability indices" compiled by matchmaking agency Sunoo -- now on a par with doctors and lawyers.

R.Buehler--VB