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, 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.
“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
