S&P Global Ratings on Tuesday forecast Samsung Electronics' credit metrics would strengthen as demand for semiconductors rises.

In a press release, S&P said it expects Samsung Electronics to sustain solid results over the next 1 to 2 years. It said strong demand in the memory semiconductor business, a high-profit and high-growth segment, is expected to support a sharp jump in profitability.

It also said Samsung Electronics' EBITDA margin is expected to rise by about 10 percentage points to the mid-30 percent range, helped by increased demand for memory chips.

S&P said demand for Samsung Electronics' high-bandwidth memory (HBM) is likely to remain strong as large-scale data centre operators, or hyperscalers, continue to expand investments related to artificial intelligence (AI).

It explained that as major memory makers increase the share of production focused on high-profit products such as HBM and server DRAM, prices of general-purpose memory chips are also likely to remain high.

It added that given Samsung Electronics is the largest supplier in the general-purpose memory market and is expanding its HBM business, such market conditions are likely to help improve its overall operating performance.

It said the risk of a reversal in the AI-driven demand cycle is low for now. It said a sharp downturn in industry conditions in the short term is unlikely given a severe memory shortage and the lack of meaningful capacity expansion over the next 1 to 2 years.

S&P said the improving trend in Samsung Electronics' operating profit is expected to continue for some time. It said DRAM and NAND memory prices more than doubled in the latest quarter, and tight supply is likely to provide solid support for selling prices over the next 1 to 2 years.

It added that the benefits to Samsung Electronics, the world's largest maker of general-purpose memory chips, are expected to be substantial.

For its smartphone business, profitability is expected to come under pressure from rising costs, but profit generated by the memory segment is expected to far exceed any decline in smartphone earnings, it said.

S&P said capital expenditure is expected to increase over the next 1 to 2 years as Samsung Electronics expands facility investment to boost memory production capacity. It said that despite the higher investment, Samsung is expected to further strengthen its already solid net cash position backed by abundant operating cash flow.

[Yonhap News Agency]