Samsung Electronics announced a significant boost in first-quarter operating profits, driven by the recovery of chip prices and increased demand for AI-driven products.
This marks a positive turnaround after a prolonged period of profit decline. Amidst the impact of weakened gadget demand and the rise in post-Covid inflation, the company took decisive measures to address the situation.
Samsung's Profits Surge
According to Forbes, Samsung made significant cuts to its memory chip production to stabilize prices. By the first quarter, prices had increased by approximately 20%, as reported by TrendForce, a reputable market research agency.
Additionally, there was a significant increase in the demand for Samsung's HBM chips, which are crucial for AI processing.
This boost in demand greatly contributed to the semiconductor giant's profitability. In a recent statement, Nvidia's CEO, Jensen Huang, revealed that his company is currently evaluating Samsung's new HBM chips for potential use in Nvidia's graphics processing units.
This news had an immediate positive impact on Samsung's shares, resulting in a 6% increase. An analyst from CLSA, Sanjeev Rana, has highlighted that the average selling prices of memory chips are projected to rise even more in 2024.
This increase is attributed to factors such as improving memory demand-supply, decreasing inventory, and the strong demand from AI applications and HBM production ramp-up.
Samsung Execs Forced to 6-Day Work Week
Meanwhile, Samsung executives across all units were reportedly required to work six days a week due to uncertainties following lower-than-expected performance in 2023.
In 2023, Samsung Electronics reported an operating loss of $11 billion in its mainstay semiconductors business. The division responsible for Samsung's semiconductor business is a major contributor to the company's earnings, explaining why the company has shifted its focus towards involving all employees.
Samsung has acknowledged the impact of geopolitical risks associated with the Russia-Ukraine conflict and the tension in the Middle East, emphasizing the importance of adjusting their business strategies accordingly.
Samsung's construction, shipbuilding, and engineering units have already agreed to voluntarily work six days a week starting in 2023. According to Daily Mail, employees below the executive level will maintain their current five-day work week, which has been the company's standard since 2003.
It is uncertain as to which individuals in the company's leadership were responsible for the decision to implement a six-day work week.
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