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Samsung reports highest profit in 3 years on global chip shortage

Samsung Electronics has estimated that its earnings jumped to the best degree in three years within the third quarter on report gross sales and elevated semiconductor costs.

However the world’s greatest producer of reminiscence chips, smartphones and digital shows tempered its upbeat steering with a warning that pc chips could possibly be coming into a downcycle.

Samsung mentioned working revenue hit Won15.8tn ($13.2bn) between July and September, up 28 per cent from Won12.3tn a 12 months earlier. It was barely decrease than the Won16.1tn estimated by analysts polled by Refinitiv.

Gross sales rose 9 per cent to a excessive of Won73tn as surging demand for shopper electronics throughout coronavirus lockdowns boosted chip orders.

However Samsung’s earnings are anticipated to fall within the present quarter, with chip costs coming below stress because the home-working boom fades and economies reopen. US rival Micron Know-how warned final month that its near-term reminiscence chip shipments would slip due to components shortfalls.

“As we enter the ‘with Covid’ period, with extra individuals returning to normality, demand for electronics corresponding to laptop computer computer systems and TVs is weakening,” mentioned Kim Younger-woo, an analyst at SK Securities. “Rising inflation may also drive up their manufacturing prices, which is able to subsequently damp demand.”

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

Samsung shares have fallen greater than 20 per cent from a January peak on issues that the semiconductor business could possibly be coming into a prolonged downcycle. Its shares gained 0.84 per cent on Friday morning.

The corporate was buying and selling at lower than 11 occasions ahead earnings, near its five-year common, however less expensive than smartphone rival Apple’s 25 occasions.

Detailed outcomes will likely be introduced later this month.

“Samsung’s share worth is below stress because of worries that the semiconductor cycle will peak out and the corporate’s pricing energy could possibly be undermined by rising inventories of consumers,” wrote Kim Dong-won, an analyst at KB Securities, in a current report.

However analysts projected that Dram reminiscence chip costs would recuperate after a modest demand dip, as chipmakers’ provides and inventories remained tight.

Samsung is a dominant producer of Drams, which allow short-term storage for graphic, cell and server chips, and Nand chips. Dram chip costs rose 7.9 per cent from the earlier three months. whereas these of Nand flash chips, which permit for recordsdata and information to be saved with out energy, gained 5.5 per cent, in keeping with information from analysis supplier Trendforce.

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

“Dram costs will stay below stress from December by way of March on weak demand,” mentioned Kim at SK Securities, including that “the worth decline will likely be slower earlier than a turnround within the third quarter, though Nand chip costs are prone to stay weak all through subsequent 12 months”.

Samsung bought about 2m models of its new foldable smartphone, which it launched in August after slashing costs in a bid to spice up gross sales. However cell earnings had been dented by advertising and marketing prices, whereas the chip scarcity hampered manufacturing.

The corporate’s smartphone shipments fell to 69m within the third quarter from 80m a 12 months earlier, in keeping with Claire Kim at Hana Monetary Funding, which had boosted Samsung forward of Apple to the highest of the handset leaderboard.

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