* The quarterly revenues amounted to $52.6 billion, with operating profits reaching $4.83 billion.
* Global IT demand and business environment expected to improve in H2 based on demand for AI applications.
By: Pakinam Khaled
Samsung Electronics reported its financial performance for the Q1 of 2024, revealing consolidated revenues of $52.6 billion. This upswing was primarily propelled by robust sales of its flagship smartphone line, the Galaxy S24, and the price hikes in memory semiconductors. Operating profits surged to $4.83 billion, enhanced by the rebound of its memory businesses to meet the demand for premium products. The Mobile Experience (MX) unit also posted higher profits, supported by enhancements in visual display and digital devices.
The depreciation of the Korean Won against major currencies positively influenced the company's total operating profits, which saw an increase of approximately $219,000 compared to the previous quarter. Total capital expenditures for the company in Q1 amounted to $8.26 billion, with $7.1 billion allocated to the Device Solutions (DS) unit and $804,000 to the Samsung Display Corporation (SDC).
Memory Unit's Profitability Rebounds
The memory unit's profitability bounced, with expectations for sustained robust performance in Q2 driven by the ongoing demand for AI. The DS unit recorded consolidated revenues of $16.9 billion, with operating profits of $1.3 billion for Q1.
In the server and storage segments, the demand for generative AI continued its strong growth trajectory, while the demand for DDR5 memory and high-density solid-state drive engines remained robust. The PC and mobile phone sectors witnessed growth in content per box in both DRAM units and NAND electronic gates, courtesy of active sales by mobile phone OEMs in China.
The Memory Business Unit restored its profitability through qualitative expansion, catering to demand in the server, storage, PC, and mobile phone sectors, with a focus on high-performance products such as HBM random access memory, DDR5, SSD drives for servers, and UFS 4.0 flash storage unit, along with an increase in open-source network ASP. Looking ahead to Q2, sector growth is expected to persist, driven by the demand for generative AI.
In the server and storage sectors, the continued increase in supplies of AI servers and the resulting expansion of related cloud services are anticipated to bolster demand for HBM, traditional servers, and storage solutions. Mobile phone demand is projected to remain steady, while the PC sector may experience some seasonal slowdown prior to the launch of new products in H2.
H2 of 2024 is anticipated to witness favorable working conditions, with ongoing demand for generative AI despite economic and geopolitical challenges.
In terms of mobile sensor devices, the usage rate is expected to remain high, including the widespread production of 50MP products to meet global customer needs. As for DDI units, continuous sales growth is anticipated to meet the increasing demand from a key customer developing new products in IT and TV technology. In anticipation of potential increased pressure on component pricing, the System LSI Business unit will proactively adjust its product lineup to effectively manage these challenges.
The casting business faced a sales recovery delay due to slowing market demand and ongoing inventory adjustments, but notable improvements in manufacturing efficiency led to a slight reduction in losses.
With the potential gradual improvement in market conditions, Q2 revenues are expected to rebound, with double-digit growth on a quarterly basis following their lowest levels in Q1.
Future Outlook and Growth Strategy
Samsung Display Corporation (SDC) is strategically concentrating on flexible display screens, information technology, and automotive applications. The Company reported consolidated revenues of $3.9 billion and operating profits of $248,000 In Q1. Despite ongoing demand constraints, especially in the large display screen industry, SDC managed to curtail its losses by introducing new QD-OLED screens and strengthening its customer base.
Looking ahead, SDC anticipates a surge in mobile phone screen sales in Q2, driven by the launch of new foldable phones from a key customer, along with an increased demand for information technology products. However, intense competition may impact profit growth in this segment.
SDC aims to bolster its competitiveness by ramping up sales of flexible display screens and continuing to phase out LCD screens in smartphones in H2. Moreover, the company plans to fortify its foothold in information technology and automotive functions to diversify its business portfolio. SDC is targeting an increase in sales of large display screens compared to the previous year, focusing on improving the efficiency of producing QD-OLED screens and enhancing product diversity with a spotlight on high-value-added offerings.
Resilience Amidst Challenges
Meanwhile, the Mobile Experience (MX) unit is witnessing revenue growth despite the market slowdown. MX Business and Network businesses recorded consolidated revenues of $24.5 billion and $2.5 billion in operating profits for Q1. Although demand for smartphones in premium and mid-size categories dipped in Q1 due to seasonal effects, MX managed to increase revenue and operating profit through robust sales of the Galaxy S24 series. This was complemented by continuous efforts to optimize resources and maintain strong profitability.
Looking ahead to Q2, smartphone demand is expected to decline sequentially, leading to lower smartphone shipments. MX Business will strive to boost sales by expanding AI features in the Galaxy S24 to other models while aiming to sustain strong profitability through operational improvements, notwithstanding geopolitical fluctuations and rising component costs. H2 is anticipated to witness a recovery in the smartphone market, supported by stable consumer confidence, expansion of AI-related products and services, and economic growth in emerging markets.
MX Business will continue its drive for operational efficiency to counter rising component costs, ensuring robust annual profitability. Furthermore, it will persist in investing in research and development to augment and refine Galaxy AI capabilities.
Pioneering Visual Innovation
Innovation in visual display and digital devices in the era of AI is poised to lead the way. The Visual Display and Digital Devices businesses reported consolidated revenues of $9.8 billion and operating profits of $387,000 in Q1. Despite an overall decline in market demand, the Visual Display unit managed to increase profitability compared to the previous quarter, driven by a focus on premium products such as Neo QLEDs, OLEDs, and large TVs over 75”. However, annual profitability declined due to stagnant demand in the TV market, increased costs, and heightened competition.
Looking ahead, Q2 is expected to witness a further decline in overall market demand, resulting in lower demand for TVs in emerging markets. However, the organization of major global sporting events may provide opportunities for sales expansion. With a focus on profitability, the Visual Display business aims to enhance sales of strategic products and improve operational management within each business sector.
Forecasts for H2 of 2024 point towards a gradual recovery in overall TV demand amid uncertainties in the overall economy and geopolitical landscape. The Visual Display business aims to meet various consumer preferences by developing "AI Screen Leadership" through premium TVs and Lifestyle screens. Additionally, it will provide unique customer experiences through connected devices and drive market expansion by supporting advanced features focusing on security and sustainability, while also enhancing competitiveness in service areas like Samsung TV Plus.
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About Samsung Electronics Co., Ltd.
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