Samsung Electronics' operating profit in the 57 trillion won range in the first quarter is a result rarely seen in the history of Korea's corporations. But when looking at detailed indicators, some analysts say an abnormal super-boom in the memory semiconductor market is masking cracks and warning signs in Samsung Electronics' overall business structure.
Most of the first-quarter operating profit that Samsung Electronics released on the 30th came from semiconductors, particularly the memory business unit. The device solutions (DS) institutional sector, which handles the semiconductor business, posted revenue of 81.7 trillion won and operating profit of 53.7 trillion won in the first quarter. About 94% of companywide operating profit came from the DS institutional sector. Samsung Electronics said the DS institutional sector delivered its highest-ever quarterly results thanks to expanded sales of high value-added products for artificial intelligence (AI) and rising memory prices.
Even within the DS institutional sector, the tilt toward memory stood out. First-quarter memory revenue disclosed by Samsung Electronics was 74.8 trillion won, accounting for most of the DS institutional sector's total revenue. Compared with 19.1 trillion won in the first quarter last year and 37.1 trillion won in the fourth quarter last year, it swelled to roughly four times and twice those levels, respectively. Given that the foundry and system LSI business units are estimated to have posted a combined loss of around 1 trillion won, operating profit in the memory business unit is expected to approach 55 trillion won.
The surge in memory results stemmed from expanded investment in AI servers and explosive growth in demand for high bandwidth memory (HBM), server DRAM, and enterprise solid-state drives (SSD). With supply growth constrained, competition among big tech to secure memory continued, shifting pricing power to suppliers. Samsung Electronics improved profitability in the first quarter by starting mass production—an industry first—of sixth-generation HBM (HBM4) and next-generation low-power memory modules SOCAMM2.
Still, the entire DS institutional sector did not improve evenly. System LSI saw results improve on increased flagship system-on-chip (SoC) sales, but the foundry business unit is analyzed to have posted a loss of around 1 trillion won due to off-season effects. On the earnings conference call held that day, Samsung Electronics said utilization for advanced foundry processes had reached the maximum, but it is still struggling to escape losses.
The device experience (DX) institutional sector, which is responsible for finished goods, recorded revenue of 52.7 trillion won and operating profit of 3 trillion won. Revenue rose from the previous quarter on the effect of launching flagship smartphones, but higher component prices and cost burdens weighed on profitability. The mobile experience (MX) and networks business posted revenue of 38.1 trillion won and operating profit of 2.8 trillion won. A higher sales mix of the Galaxy S26 series and S26 Ultra lifted results, but networks declined on reduced investment by major telecom operators.
TVs and home appliances moved in even starker contrast to the semiconductor boom. The visual display (VD) and digital appliances (DA) businesses posted revenue of 14.3 trillion won and operating profit of 200 billion won. TV profitability improved thanks to premium and large TV sales and operational efficiencies, but home appliances saw only limited improvement despite new air-conditioner launches due to higher costs and tariff effects.
Samsung Display posted revenue of 6.7 trillion won and operating profit of 400 billion won. For small and midsize panels, results fell from the previous quarter due to seasonal off-peak demand and reduced customer demand following higher memory prices. Large panels maintained stable sales on strong demand for gaming monitor OLEDs. Harman recorded revenue of 3.8 trillion won and operating profit of 200 billion won. Constraints in memory supply, the off-season in the audio market, and development costs combined to reduce results.
First-quarter results this year show Samsung Electronics' profit structure has been rapidly reorganized around memory. In the first quarter last year, the DX institutional sector supported companywide profit with operating profit of 4.7 trillion won, while operating profit in the DS institutional sector was only 1.1 trillion won. In just a year, DS has become the institutional sector generating most of companywide profit, while the DX institutional sector, displays, and Harman have instead taken on part of the burden from rising memory prices.
The barometer for Samsung Electronics' results this year is whether memory price strength will continue after the second quarter. On the conference call, Samsung Electronics said, "Memory demand strength will continue as investment in AI infrastructure expands." An industry official said, "It is impossible for the memory business unit to consistently maintain record results like in the first quarter, given the nature of the commodity memory market, which moves with market conditions," adding, "For a balanced companywide portfolio, recovery in foundry results and production efficiencies in the DX institutional sector must proceed in parallel."