Samsung Electronics Expects Operating Profit Rose 44% in First Quarter
South Korean company beats expectations during global shortage of semiconductors and despite shutdowns of some U.S. facilities
Samsung Electronics Co. said it expects a 44% increase in operating profit for the first quarter, topping expectations during a global shortage of semiconductors and despite shutdowns of some U.S. chip-making facilities.
The world’s largest smartphone and memory-chip maker forecasts operating profit of 9.3 trillion South Korean won, equivalent to about $8.3 billion, during the first three months of the year. That compares with about 6.5 trillion won for the prior year’s quarter. The Suwon, South Korea-based firm estimates revenue of 65 trillion won, up 17% compared with the prior year.
Samsung’s outlook topped the estimate of analysts gathered by S&P Global Market Intelligence of about 9.1 trillion won in operating profit and 61.4 trillion won in revenue. The South Korean company is due to report full earnings later this month. Samsung is considered a bellwether for the tech world because it makes major electronics products and supplies competitors including Apple Inc. and Huawei Technologies Co. with components.
During the Covid-19 pandemic, Samsung and other semiconductor companies have benefited from a short-term boom in demand for memory chips from data centers stepping up capacity and consumers buying more devices to shift to working from home. Now many buyers, including auto makers, have encountered delays in trying to purchase semiconductors as economies start to reopen.
Meanwhile, global chip makers have recently announced plans to increase production capacity, and Samsung plans to invest about $116 billion by 2030 to diversity and boost its semiconductor output. The South Korean company is also considering an investment of up to $17 billion to build a new chip-making factory in the U.S.
At its annual shareholder meeting last month, Koh Dong-jin, a co-chief executive officer of Samsung, told investors that a severe global shortage in semiconductors would hurt its business into the next quarter.
Sales of Samsung’s latest flagship phone, the Galaxy S21, which launched in January, have been stronger than the prior year’s version, according to industry analysts. Global smartphone sales are expected to rise this year after falling sharply during the pandemic, which closed many bricks-and-mortar stores and triggered layoffs.