Samsung Electronics has reported its highest quarterly earnings ever, dispelling concerns about a peak in the semiconductor supercycle. However, the significant allocation for performance bonuses has raised concerns about future operating profit disclosures.
On July 7, Samsung announced that its preliminary consolidated revenue for the second quarter of this year reached 171 trillion won, with an operating profit of 89.4 trillion won. This marks a 27.74% increase in revenue and a 56.21% rise in operating profit compared to the previous quarter. Year-on-year, revenue surged by 129.31% and operating profit skyrocketed by 1810.26%. Both revenue and operating profit have set new records, surpassing the previous quarter's figures.
This performance contradicts recent concerns in the financial sector regarding a potential peak in the memory chip market. Analysts had speculated that slowing price increases and a potential slowdown in AI investments might indicate the semiconductor boom was nearing its end. However, Samsung managed to increase its operating profit by over 30 trillion won compared to the previous quarter. Industry experts predict that demand for AI server investments and high-value memory products will remain strong at least until next year.
Nevertheless, attention is focused on the underlying factors behind the reported operating profit of 89.4 trillion won. Some securities firms estimate that Samsung's performance bonus provisions for the second quarter could be around 19 trillion won. If this amount is added back, Samsung's effective operating profit would exceed 100 trillion won. While the core business profitability has reached the 100 trillion won mark, the reported figures have been adjusted down to the 80 trillion won range.
The performance bonus provisions are seen as a burden, as they cannot be viewed merely as one-time costs. Samsung has a structure in place where the special management performance bonuses for the semiconductor division are linked to operating profit. As profits increase during a boom, the compensation pool for employees also grows. While this is positive for labor stability and workforce retention, it could serve as a discount factor for operating profit in the eyes of the market.
The recently confirmed first-half target achievement bonuses (TAI) reflect a similar trend. The memory division of the DS sector will receive 100% of their base salary, while the System LSI and foundry sectors are set at 75%. In contrast, the DX sector will see MX and video display (VD) receive 50%, and home appliances (DA) receive 25%. This indicates that the semiconductor boom is being reflected across the entire compensation system.
The concern is that as Samsung is reassessed as a global leader in profitability, the reported operating profit figures may continue to be suppressed. Although 89.4 trillion won is a record high, analysts suggest that without the performance bonus provisions, the symbolic significance of surpassing 100 trillion won would be stronger. If large performance bonus provisions continue to recur during periods of strong performance, it could negatively impact stock prices and business sentiment.
Meanwhile, forecasts indicate that the memory boom, particularly for HBM and server DRAM, will continue at least until next year. TrendForce reports that demand for HBM will remain strong through 2026-2027 due to increased investment in AI infrastructure, and the wafer consumption for HBM production will continue to pressure the supply of general-purpose DRAM. As Samsung's profit scale grows, the impact of performance bonus provisions on reported results is likely to increase as well.
A source in the business community stated, "Performance bonuses are necessary as a mechanism to share the fruits of prosperity with employees, but if it leads to a structure that reduces operating profit by tens of trillions of won each year, the market may view it as a recurring discount factor. For Samsung to be recognized as a top global profit company, it needs to refine the predictability of bonus costs and the way it explains its performance results."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.