Samsung’s first-quarter earnings top estimates on robust demand for memory chips, smartphones
- Sales for the quarter ended March advanced 18 per cent to 77 trillion won, higher than analysts expected
- The new flagship Galaxy S22 series, which made its debut in February, is selling at a 20 per cent faster clip than the previous S21 series, the company said
Samsung Electronics reported preliminary earnings for the first quarter that beat analysts’ estimates on robust demand for new smartphone models and memory chips that go into servers.
Operating profit increased 50 per cent to 14.1 trillion won (US$11.6 billion) for the three months ended March, South Korea’s biggest company said on Thursday in a statement. Analysts estimated 13.4 trillion won on average.
Sales advanced 18 per cent to 77 trillion won, also higher than expected. Samsung will provide net income and divisional performance when it reports full earnings on April 28.
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Samsung is the first major technology company to report numbers for the first quarter, a period disrupted by war in Ukraine, sanctions on Russia and resurgent Covid-19 infections in China. Still, data centre expansions and the global shift to 5G mobile communications continue to spur demand for semiconductors that account for a large chunk of the conglomerate’s profit.
“We expect solid earnings growth in 2022 on the back of healthy earnings rebound in semiconductor and display in the second half of 2022,” Peter Lee, an analyst at Citigroup, said in a note ahead of the results. “Specifically, we expect Samsung’s memory business to benefit from the memory pricing strength throughout the second half of 2022.”
In smartphones, another Samsung growth pillar, cumulative sales of the Galaxy S22 series are likely to exceed one million units in South Korea this week, the company said.
The new flagship line-up, which made its debut in February, is selling at a 20 per cent faster clip than the previous S21 series, according to the Suwon-based firm. In the US, the S22 sold 60 per cent more than the S21 in its first three weeks on the market, according to research firm Counterpoint.
Shares of Samsung had lost about 12.5 per cent so far this year through Wednesday, with the broader chip sector underperforming as rising economic risks clouded the outlook for consumer demand.
Surging oil prices in the wake of Russia’s invasion of Ukraine along with inflation and interest-rate hikes have driven concern about dwindling disposable income and discretionary spending.
Samsung, which produces more than a third of the world’s DRAM and NAND memory chips, is affected not only by the cycles of the semiconductor industry, but also by demand from consumers as it makes both the end-products as well the chips that go into those gadgets.
The memory chip market is exiting a downturn earlier than expected, with prices dropping only modestly in the first quarter. DRAM prices fell 4 per cent, less than the 6 per cent projected, while NAND declined 3 per cent, according to Citigroup.
NAND prices are expected to rise 5 per cent to 10 per cent in the current quarter as supply has tightened after a contamination issue at Kioxia Holdings and Western Digital’s joint venture wafer fabs in Japan, research firm TrendForce predicted.
The cost of manufacturing chips has also grown as chip makers are having to diversify sources of gases and minerals that used to be imported mostly from Ukraine. China’s lockdown policies are causing logistics disruption, which may hurt the sourcing of components and delay the production of gadgets that use Samsung memory.
Analysts have also cited the relatively slow improvement in Samsung’s production yields of advanced nodes for contract-based chipmaking as a downside risk for the stock.
