Samsung Electronics Co Ltd on Wednesday reported a likely 53% increase in second-quarter operating profit, beating market estimates amid high chip prices and demand despite lower smartphone sales.
Preliminary result is up 33% from the first quarter and underlines the growing demand for chips which has depleted stocks amid pandemic consumer appetite for electronics and recovery of investments in centers of data.
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The world’s largest maker of memory chips and smartphones said profit for the quarter ended June 30 was likely 12.5 trillion won ($ 11 billion), well above a Refinitiv SmartEstimate of 11. 3 billion won. If confirmed later this month, it would be the tech giant’s biggest second-quarter profit since 2018.
“Third quarter profit is expected to be even higher given high prices for mobile DRAM chips and high seasons for mobile and display businesses,” said Park Sung-soon, analyst at Cape Investment & Securities.
For the second quarter, profits for Samsung’s chip division likely jumped a fifth or more from a year ago, analysts say, helped by high memory chip prices and consumer electronics demand and data center customers.
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Samsung’s memory chip shipments, especially for DRAM chips widely used in servers, cellphones and other computing devices, were larger than expected, contributing to chip profits that overshadowed a sharp decline in a quarter to quarter of smartphone shipments.
Improved production efficiency of advanced 1z nanoscale DRAM chips using ASML’s extreme ultraviolet (EUV) lithography machines also likely reduced costs compared to the first quarter, analysts said.
Profits from Samsung’s contract chip manufacturing and logic chip design business also likely improved as operations at a storm-hit factory in Texas returned to normal, analysts said.
“One of the most anticipated items in the earnings call later this month is the increasing competitiveness of the contract chip manufacturing business and the current state of foundry customers and orders.” said Lee Won-sik, analyst at Korea Investment & Securities.
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“Another is what Samsung expects from memory chip profitability, as competitors like Micron are supposed to close the technology gap (with Samsung),” Lee added.
Last month, US memory chip rival Micron Technology Inc reported quarterly profit above Wall Street estimates and forecast current quarter revenue above expectations.
Samsung’s smartphone shipments fell to around 59 million in April-June, from around 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales of its flagship model launched in the first quarter slowed.
New COVID-19 outbreaks in regions such as India and Vietnam, along with a limited supply of mobile processor chips, also hurt smartphone shipments in the quarter, analysts said. These conditions should improve in the second half of the year, they added.
A one-time gain for Samsung’s display unit, which analysts said was compensation from Apple for previously ordering fewer components than expected, was also included in quarterly profit.
Revenue rose about 19 percent from the same period a year earlier to 63 trillion won, Samsung said.
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Samsung shares fell 1% in morning trading, while the broader market fell 0.7%. Samsung shares have traded almost flat so far this year, compared to a 15% increase in the benchmark KOSPI.
Samsung released only limited data in Wednesday’s regulatory filing ahead of the release of detailed earnings figures later this month.
($ 1 = 1,136,7,800 won)
(Reporting by Joyce Lee & Heekyong Yang; editing by Richard Pullin)