© Reuters. FILE PHOTO: The logo of Samsung Electronics is seen inside an office building in Seoul, South Korea, October 11, 2017. Reuters/Kim Hong-Ji
By Joyce Lee and Heekyong Yang
SEOUL (Reuters) – Samsung Electronics Co Ltd reported an estimated 50 percent rise in quarterly operating profit on Thursday, the highest first-quarter profit since 2018, beating expectations as strong demand propped up prices for electronic equipment and memory chips .
Earnings for the world’s largest maker of memory chips and smartphones were also underpinned by strong smartphone sales during the quarter and disruptions at rival NAND flash memory chip factories, analysts said.
Samsung (KS ?) estimated its first-quarter profit at 14.1 trillion won ($11.6 billion) in its preliminary earnings release, compared with 13.3 trillion won by Refinitiv SmartEstimate. Revenue is likely to rise 18% from a year earlier to a record 770,000 100 million won, also higher than market expectations.
“The forecast beat market expectations, probably due to better-than-expected memory chip shipments and prices,” said Park Sung-soon, an analyst at Cape Investment & Securities.
Although memory chip prices fell in the first quarter, analysts said strong demand from data center customers, as well as cautious capital spending and limited capacity expansion from chipmakers, underpinned earnings for Samsung, whose chips account for about half of its total profit .
The chipmaker could also benefit from disruptions at Japan’s Kioxia and rival NAND flash memory chip factories owned by the U.S. company. Western Digital (Nasdaq ? due to raw material contamination.
“Following the Kioxia contamination issue, I believe Samsung has a rush order for NAND Flash chips for products requiring Kioxia protection,” Park said.
Data provider TrendForce said disruptions at the Kioxia plant in early February are expected to boost NAND flash prices by 5-10%, offsetting moderately high inventories held by buyers.
According to Counterpoint Research, Samsung shipped about 72 million smartphones in the first quarter, down about 11% year-on-year, mainly due to the later-than-usual launch of its latest flagship smartphone, the Galaxy S22.
Counterpoint deputy director Sujeong Lim said that in the first week after the Galaxy S22 series was launched in late February, its global sales were about 50% higher than the previous S21 model.
Shipments of the Samsung S22 series are expected to exceed 6 million units by the end of March, Lim said, adding that sales were in line with initial expectations.
When Samsung reports detailed results on April 28, investors will be interested in commenting on its merger plans, how it plans to use its memory chip business to boost profitability, and chip requirements for the company’s prospects.
Samsung shares were down 0.2% in early trade, while the broader market fell 0.9%.
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