Samsung electronics flags 53% jump

Samsung Electronics Co Ltd reported a likely 53 percent increase in second-quarter operating profit on Wednesday. This is a step up on market expectations due to solid chip prices and demand despite lower smartphone sales.

The preliminary result is up 33% from the first quarter, highlighting the soaring demand for chips with depleted stockpiles due to pandemic-driven consumer appetite for electronics and recovering investment in data centers. The world’s largest memory chip and smartphone manufacturer predicted a profit of 12.5 trillion won for the fiscal quarter ending June 30. If confirmed later this month, it would be the company’s most considerable second-quarter profit since 2018.

The third-quarter profit will be even higher due to mobile solid DRAM memory chip prices and peak seasons for the mobile and display businesses,  according to Park Sung-soon, an analyst at Cape Investment & Securities.

Samsung’s chip division profit

Analysts estimate that Samsung’s chip division profit increased by a fifth or more year on year in the second quarter. This is due to high memory-chip prices and demand from consumer electronics and data center customers. Samsung’s memory chip shipments were higher than expected, particularly for DRAM chips. Chip is widely used in servers, mobile phones, and other computing devices, contributing to chip profits.

Analysts predicted that profits at Samsung’s chip contract manufacturing and logic chip design businesses would have increased as a storm-damaged factory in Texas resumed.

One of the most eagerly anticipated aspects of the earnings call later this month will be how far the chip contract manufacturing business has advanced in terms of competitiveness and the current status of foundry customers and orders. Micron Technology Inc, a competitor in the US memory chip market, reported a quarterly profit that exceeded Wall Street estimates last month and forecasted current-quarter revenue that exceeded expectations.

Shipments

Samsung’s smartphone shipments down to around 59 million in April-June from approximately 76 million in the first quarter, according to Shinyoung Investment & Securities. Analysts believe that 19 outbreaks in India and Vietnam, combined with a shortage of mobile processor chips. They added that these conditions are likely to improve in the second half.

A one-time gain for Samsung’s display unit included in the quarterly profit, which analysts said was compensation from Apple for previously ordering fewer components than agreed upon.

Revenue increased by an estimated 19% year on year to 63 trillion won, according to Samsung. In morning trade, Samsung shares fell 1%, while the broader market fell 0.7 %. So far this year, Samsung shares have traded nearly flat, compared to a 15% rise in the benchmark KOSPI. In its regulatory filing on Wednesday, Samsung provided only limited information ahead of the release of detailed earnings figures later this month.