Samsung Electronics Co Ltd on Wednesday reported a possible jump of 53% in operating profit for the second quarter, beating market estimates due to strong prices and demand for chips despite lower smartphone sales.
The preliminary result is 33 percent from the first quarter and highlights the growing demand for brands that has depleted stocks amid a pandemic consumer appetite for electronics and the recovery in data center investment.
For all the latest news, follow the Daily Star Google News channel.
The world’s largest maker of memory chips and smartphones said profits for the quarter ended June 30 were probably 12.5 trillion won ($ 11 billion), well above a Refinitiv SmartEstimate of 11.3 trillion won. If confirmed later this month, it will be the tech giant’s biggest second-quarter profit since 2018.
“Third-quarter profit is expected to be even higher at strong DRAM memory chip prices for mobile and peak season for mobile and advertising businesses,” said Park Sung-soon, a Cape Investment & Securities analyst.
For the second quarter, Samsung chip profits rose by a fifth or more than a year earlier, analysts said, with strong chip-memory prices and demand for consumer electronics and data center customers.
Samsung’s memory chip shipments, especially for DRAM chips widely used in servers, mobile phones and other computing devices, were higher than expected, contributing to chip profits that overshadowed a sharp quarter-quarter drop in smartphone shipments.
Improved performance in producing 1z nanometer cutting-edge DRAM chips using ASV extreme ultraviolet (EUV) machines also reduced costs from the first quarter, analysts said. Profits from Samsung chip contract makers and logic chip design companies were likely to have improved as work at a Texas-hit factory returned to normal, analysts said.
“One of the most anticipated figures in the profit call later this month is how far the chip contract business has come in terms of competitiveness and the current state of customers and foundry orders,” said Lee Won-sik, an analyst at Korea Investment & Securities .
“Another is what Samsung expects in the profitability of memory chips, as competitors like Micron say they are closing the technology gap (with Samsung),” Lee added.
Last month, U.S. memory chip rival Micron Technology Inc. reported quarterly earnings that exceeded Wall Street estimates and forecast revenue for the current quarter above expectations.
Samsung smartphone shipments fell to about 59 million in April-June from about 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales of the top model that started in the first quarter slowed. New cases of Covid-19 in areas such as India and Vietnam, as well as limited supply of mobile processors, also hit smartphone shipments in the quarter, analysts said. These conditions are likely to improve in the second half, they added.
A one-off profit for Samsung’s display unit, which analysts said was a compensation from Apple for ordering less than previously agreed items, was also included in the quarterly profit. Revenue rose about 19 percent from the same period last year to 63 trillion won, Samsung said.
Shares of Samsung fell 1 percent in the morning, while the broader market fell 0.7 percent. Samsung shares have traded almost stable so far this year against a 15% increase at the KOSPI benchmark.
Samsung released only limited data in its archive on Wednesday before releasing detailed earnings figures later this month.