Samsung Electronics has reported its highest quarterly earnings ever, defying concerns about a peak in the semiconductor supercycle. However, analysts warn that the substantial performance bonus provisions could dampen future earnings disclosures.
On July 7, Samsung announced its preliminary consolidated revenue for the second quarter of this year at 171 trillion won, with an operating profit of 89.4 trillion won. Both revenue and operating profit figures surpassed the previous record set in the first quarter.
This performance contradicts recent predictions from some analysts regarding a peak in the memory chip market. While there were concerns about slowing price increases and potential adjustments in AI investment, Samsung's operating profit increased by over 30 trillion won compared to the previous quarter. Industry experts expect strong demand for AI server investments and high-value memory products to continue at least until next year.
However, the market is closely watching the implications of this record operating profit. Some securities firms estimate that Samsung's performance bonus provisions for the second quarter could be around 19 trillion won. If this amount is excluded, Samsung's operating profit before provisions would exceed 100 trillion won. While the core business profitability reached the 100 trillion won mark, the reported figure has been lowered 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 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 relations and employee retention, it could act as a discount factor that reduces reported operating profit each year.
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 divisions are set at 75%. In contrast, the DX sector's MX and video display (VD) divisions will receive 50%, and home appliances (DA) will 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 top global profit-making company, its reported operating profit figures may continue to be suppressed. Although 89.4 trillion won is a record performance, analysts suggest that without the performance bonus provisions, the symbolic significance of surpassing 100 trillion won would be stronger. In a competitive landscape with other global giants, repeated large-scale performance bonus provisions during strong earnings 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 predicts that demand for HBM will remain strong due to increased investment in AI infrastructure, and the wafer consumption from 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 also likely to increase.
A business insider stated, "While performance bonuses are necessary as a mechanism to share the fruits of prosperity with employees, if they consistently reduce operating profit by tens of trillions of won each year, the market may view this as a recurring discount factor. For Samsung to be recognized as a top global profit-making company, it needs to refine the predictability of performance bonus costs and the way it explains its results."
* This article has been translated by AI.
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