As Samsung Electronics continues to grow, it is seeking innovative ways in which they can lead the smartphone industry. With a new design that emphasizes on high-end components and software innovations, this company looks forward to being one of the leaders not only in smartphones but also in technology.
Samsung Electronics Expects 52% Rise in Quarterly Operating Profit, Samsung’s Q3 operating profit to hit 2.6 trillion won.
SEOUL— Samsung Electronics Co. expects a 52 percent increase in fourth-quarter operating profit over the previous year, boosted by strong demand for memory chips and higher returns from its contract chip-making business.
For the quarter ending Dec. 31, the world’s top smartphone and memory-chip manufacturer predicts operating profit of about 13.8 trillion South Korean won, or about $11.4 billion. In comparison, the previous quarter’s total was about 9.05 trillion won.
Although Samsung’s anticipated fourth-quarter operating profit fell short of market forecasts, the company stated the decrease was due to a one-time incentive offered to staff.
The firm, located in Suwon, South Korea, believes it made 76 trillion in sales, a 24 percent increase over the previous quarter and a quarterly revenue record for the company.
Samsung’s improved top-line performance underscores the semiconductor industry’s continued success, which has benefited from increased demand amid a long-running supply shortage. Because it is both a significant electronics manufacturer and a component supplier to large tech companies such as Apple Inc. and Sony Group Corp., the business is regarded a bellwether for the industry.
Samsung and many other chipmakers have witnessed an increase in income as a pandemic-fueled rise in demand for all types of semiconductor-based products has resulted in widespread shortages and price increases.
S&P Global Market Intelligence surveyed analysts and found that they anticipated the firm to earn 15.2 trillion won in operating profit and 75 trillion won in sales. Samsung is expected to release its complete earnings report later this month.
In early Friday trade in South Korea, Samsung shares jumped 1.3 percent.
Memory chip prices—both DRAM and NAND flash—were predicted to fall in the last three months of last year, as a worldwide semiconductor scarcity slowed the manufacturing of a variety of electronic goods that need memory.
According to CW Chung, head of Asia technology research at Nomura Holdings Inc., profits held up since the price decrease was lower than predicted owing to strong demand for server memory chips in particular, combined with the gradual alleviation of the chip scarcity.
According to TrendForce, a Taiwan-based industry researcher, fourth-quarter DRAM costs are predicted to have plummeted by up to 8% from the previous quarter, while fourth-quarter NAND flash prices are expected to have fallen by up to 5%.
Memory costs are projected to drop much further in the first half of this year, according to experts, while temporary production modifications at Samsung’s memory manufacturing facilities in Xi’an, China, which were recently rocked by Covid-19 lockdowns, may help to mitigate the reduction.
Mr. Chung expects stronger earnings in Samsung’s contract chip manufacturing sector in the fourth quarter, since businesses have been able to charge higher rates due to capacity shortages compared to demand.
The chip manufacturing sector is now investing heavily in order to increase production capacity. Samsung Group said last year that it will spend more than $205 billion over the next three years, with chip manufacturing being a top focus. In November, Samsung Electronics announced a $17 billion investment in Taylor, Texas, as part of its plan to expand its chip capabilities beyond memory.
Intel Corp. recently announced plans to invest up to $95 billion in new chip-making facilities in Europe, while Taiwan Semiconductor Manufacturing Co. announced plans to invest a record $100 billion in manufacturing capacity over the next three years.
Meanwhile, Samsung’s smartphone division is likely to have had a great quarter, due in part to a strong rollout of its premium foldable phone lineup—the Galaxy Z Fold 3 and Galaxy Z Flip 3—as well as a robust pushout of its premium foldable phone lineup. However, marketing expenses are believed to have had an impact on profitability.
Samsung said last month that global sales of its foldable smartphones in 2021 would be four times more than the previous year’s record. It didn’t say how much it shipped.
Component shortages, on the other hand, continue to wreak havoc on the phone sector. According to Tom Kang, a Seoul-based research director at Counterpoint Research, supply of chips such as application processors, power management chips, and display drivers is limited, limiting shipments.
“While the component scarcity is easing, supply remains constrained. Mr. Kang believes that Samsung might have done better in this quarter if the semiconductor supply crisis had been resolved sooner.
According to Counterpoint, Samsung delivered over 67 million phones in the fourth quarter, up around 7% from the previous year’s fourth quarter. Samsung, on the other hand, had supplied 70.4 million handsets in the fourth quarter of 2019 prior to the epidemic.
Samsung recently restructured its leadership and repositioned its key divisions in order to strengthen its semiconductor leadership and revive its smartphone business.
Last month, the South Korean IT behemoth removed all three of its co-CEOs and combined its mobile and consumer electronics businesses into one. Samsung is projected to benefit from the consolidation by being able to operate more readily across all of its product categories, from mobile phones to other consumer gadgets.
Jiyoung Sohn can be reached at [email protected]
Amplifications and corrections Samsung Group announced plans to spend more than $205 billion over the next three years, with chip manufacturing being a top focus. Samsung Electronics would invest more than $250 billion, as stated in an earlier version of this article. (Correction dated January 6.)
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