Chip prices buoy Samsung profits

samsung pyeongtaek 2156 1120 - Chip prices buoy Samsung profits

A Samsung Electronics chip facility in Pyeongtaek, South Korea

Samsung Electronics likely saw a 38% surge in profit for the April to June quarter thanks to strong chip prices and demand spurred by a pandemic-led consumer appetite for electronics as well as recovering investment in data centres.

Operating profit for the world’s biggest memory chip and smartphone maker likely jumped to ₩11.3-trillion (US$10-billion), according to a Refinitiv SmartEstimate drawn from 20 analysts and weighted toward those who are more consistently accurate.

The South Korean tech giant’s strong performance — coming despite it shipping fewer smartphones than in January to March — underscores the stratospheric demand for chips that has depleted stockpiles and filled production capacity.

The result would be up 20% from the first quarter and mark Samsung’s highest operating income for the second quarter since 2018. Revenue likely rose 15.4%. Samsung is scheduled to announce preliminary second-quarter results on Wednesday.

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The company’s chip division likely benefited from memory chip price hikes that exceeded market estimates, analysts said, while shipments grew as well. Prices of Dram chips, widely used in servers, mobile phones and other computing devices, jumped 27% compared to the March quarter, while those of Nand flash chips that serve the data storage market rose 8.6%, according to research provider Trendforce.

Return to normal

Profit also improved at Samsung’s chip-contract manufacturing and logic chip design business, partly because operations at its storm-hit Texas factory returned to normal, analysts said.

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They estimated the chip division’s operating profit in April to June rose about 22% from the year-earlier period to about ₩6.6-trillion.

Still, Samsung’s smartphone shipments dropped to about 59 million in April to June from about 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales slowed for its latest flagship model, launched in mid-January.

Reduced demand from India, hard hit by the pandemic during the quarter, as well as tight supply for some mobile processor chips, may also have affected shipments, analysts said, estimating the mobile business’s operating profit at about ₩2.9-trillion.  — Reported by Joyce Lee, with additional reporting by Heekyong Yang, (c) 2021 Reuters

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