Samsung Electronics on Wednesday said first-quarter profit likely rose 44 percent, 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 South Korean technology giant forecast January-March operating profit of SKW 9.3 trillion (roughly Rs. 61,940 crores), matching a weighted average analyst forecast from Refinitiv SmartEstimate.
Analysts said Samsung’s mobile division likely saw operating profit soar more than SKW 1 trillion (roughly Rs. 6,660 crores) to about SKW 4.15 trillion (roughly Rs. 27,630 crores) 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 (roughly Rs. 14,900) lower than the S20, Counterpoint said.
Profit in Samsung’s television set and home appliance business also likely more than doubled to around SKW 1 trillion (roughly Rs. 6,660 crores), 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 SKW 1.5 trillion (roughly Rs. ,990 crores) for January-March.
In Samsung’s chip division, analysts said profit likely fell 20 percent to SKW 3.6 trillion (roughly Rs. 24,000 crores) 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 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 percent in January-March from the previous three months, showed data from TrendForce. 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 SKW 10 trillion (roughly Rs. 66,560 crores) in its chip contract manufacturing business this year, compared to about SKW 6 trillion (roughly Rs. 39,970 crores) last year.
Two top White House aides are set to host a meeting on April 12 with chipmakers and automakers in attendance on the state of the US supply chain, Reuters previously reported. Samsung is considering a new $17 billion (roughly Rs. 126,450 crores) chip plant in the United States.
Samsung also said, in a preliminary earnings release without offering any breakdown of the figures, that revenue likely rose 17 percent from the same period a year prior to SKW 65 trillion (roughly Rs. 4,32,990 crores).
Its share price traded down 0.2 percent after the release versus a 0.2 percent rise in the benchmark KOSPI. The stock has risen about 6.2 percent so far this year versus the KOSPI’s 8.8 percent.
© Thomson Reuters 2021
What is the best phone under Rs. 15,000 in India right now? We discussed this on Orbital, the Gadgets 360 podcast. Later (starting at 27:54), we speak to OK Computer creators Neil Pagedar and Pooja Shetty. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, and wherever you get your podcasts.