Samsung reports highest profit in 3 years on global chip shortage

Samsung Electronics has estimated that its revenue jumped to the very best diploma in three years throughout the third quarter on doc product sales and elevated semiconductor prices.

Nonetheless the world’s biggest producer of memory chips, smartphones and digital exhibits tempered its upbeat steering with a warning that computer chips may probably be coming right into a downcycle.

Samsung talked about working income hit Won15.8tn ($13.2bn) between July and September, up 28 per cent from Won12.3tn a yr earlier. It was barely lower than the Won16.1tn estimated by analysts polled by Refinitiv.

Product sales rose 9 per cent to a extreme of Won73tn as surging demand for consumer electronics all through coronavirus lockdowns boosted chip orders.

Nonetheless Samsung’s earnings are anticipated to fall throughout the current quarter, with chip prices coming beneath stress as a result of the home-working boom fades and economies reopen. US rival Micron Experience warned ultimate month that its near-term memory chip shipments would slip attributable to components shortfalls.

“As we enter the ‘with Covid’ interval, with further people returning to normality, demand for electronics just like laptop computer laptop laptop techniques and TVs is weakening,” talked about Kim Youthful-woo, an analyst at SK Securities. “Rising inflation could even drive up their manufacturing costs, which might subsequently damp demand.”

The global shortage of non-memory chips moreover boosted revenue at Samsung’s foundry enterprise, which is planning to take a place $17bn in a model new US plant for contract chip manufacturing.

Samsung shares have fallen larger than 20 per cent from a January peak on points that the semiconductor commerce may probably be coming right into a prolonged downcycle. Its shares gained 0.84 per cent on Friday morning.

The company was shopping for and promoting at decrease than 11 events forward earnings, close to its five-year widespread, nevertheless inexpensive than smartphone rival Apple’s 25 events.

Detailed outcomes could be launched later this month.

“Samsung’s share value is beneath stress due to worries that the semiconductor cycle will peak out and the company’s pricing power may probably be undermined by rising inventories of buyers,” wrote Kim Dong-won, an analyst at KB Securities, in a modern report.

Nonetheless analysts projected that Dram memory chip prices would get higher after a modest demand dip, as chipmakers’ offers and inventories remained tight.

Samsung is a dominant producer of Drams, which permit short-term storage for graphic, mobile and server chips, and Nand chips. Dram chip prices rose 7.9 per cent from the sooner three months. whereas these of Nand flash chips, which allow for data and knowledge to be saved with out power, gained 5.5 per cent, in response to data from evaluation provider Trendforce.

The launch of Intel’s new central processing unit throughout the second quarter of 2022 can be anticipated to drive demand.

“Dram prices will keep beneath stress from December by March on weak demand,” talked about Kim at SK Securities, together with that “the value decline could be slower sooner than a turnround throughout the third quarter, although Nand chip prices usually tend to keep weak all by subsequent yr”.

Samsung purchased about 2m gadgets of its new foldable smartphone, which it launched in August after slashing prices in a bid to boost product sales. Nonetheless mobile earnings had been dented by promoting and advertising and marketing costs, whereas the chip shortage hampered manufacturing.

The company’s smartphone shipments fell to 69m throughout the third quarter from 80m a yr earlier, in response to Claire Kim at Hana Financial Funding, which had boosted Samsung ahead of Apple to the best of the handset leaderboard.

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