Samsung Electronics on Wednesday said first quarter profit likely rose 44%, with analysts attributing the surge to brisk sales of smartphones and TVs, albeit tempered by a likely fall in chip earnings after a storm halted US output.
The Korean technology giant forecast January to March operating profit of ₩9.3-trillion (R120.7-billion), matching a weighted average analyst forecast from Refinitiv SmartEstimate.
Analysts said Samsung’s mobile division likely saw operating profit soar more than ₩1-trillion won to about ₩4.15-trillion after its flagship Galaxy S21 smartphone series outsold the previous version by a two-to-one margin in the six weeks since its January launch, according to research provider Counterpoint.
A lower starting price for the flagship helped sales for the world’s largest smartphone maker during the quarter
A lower starting price for the flagship helped sales for the world’s largest smartphone maker during the quarter, with the S21 priced $200 lower than the S20, Counterpoint said.
Profit in Samsung’s television set and home appliance business also likely more than doubled to around ₩1-trillion, analysts said, due to continued stay-at-home demand.
Cross-town TV and home appliance rival LG Electronics on Wednesday announced its largest-ever preliminary quarterly operating profit of ₩1.5-trillion for January to March.
Chips are down
In Samsung’s chip division, analysts said profit likely fell 20% to ₩3.6-trillion due to the cost of ramping up domestic production as well as losses at its Texas plant following a mid-February stoppage, blunting the benefits of strong demand.
US memory chip peer Micron Technology last month forecast third quarter revenue above analyst estimates due to rising demand brought about by a global shift to remote work.
The price of DRAM chips widely used in laptops and other computing devices rose 5.3% in January to March from the previous three months, data from TrendForce showed. Analysts expect that trend to continue as a global chip shortage spurs on buyers to snap up supplies.
Samsung’s Galaxy S21 Ultra
“Prices are likely to rise further in the current quarter due to solid demand for servers,” said analyst Park Sung-soon at Cape Investment & Securities.
When Samsung announces detailed earnings later this month, “there will be interest in finding out how much Samsung is struggling in terms of low yields in its non-memory business, in addition to the extent of the losses in Texas and the US pressure to increase chip investment,” Park said, referring to the number of non-memory chips that pass quality tests.
Analysts have estimated that Samsung will invest about ₩10-trillion in its chip contract manufacturing business this year, compared to about ₩6-trillion last year.
Two top White House aides are set to host a meeting on 12 April with chip makers and automakers in attendance on the state of the US supply chain. Samsung is considering a new, US$17-billion chip plant in the US.
Samsung also said, in a preliminary earnings release without offering any breakdown of the figures, that revenue likely rose 17% from the same period a year prior to ₩65-trillion. — Reported by Joyce Lee and Heekyong Yang, (c) 2021 Reuters