Joyce Lee and Heekyung Yang
SEOUL (Reuters) – Samsung Electronics on Friday estimated a more than 10-fold rise in its first-quarter operating profit as a recovery in semiconductor prices lifted profits from a low base a year ago when demand for chips suffered a severe slump.
The world’s largest maker of memory chips and televisions estimated that its operating profit rose to 6.6 trillion won ($4.89 billion) for the quarter ended March 31.
That’s up 931% from 640 billion won a year earlier, the South Korean company said in a brief preliminary earnings report, and would be Samsung’s (KS:) highest operating profit since the third quarter of 2022.
The operating profit estimate exceeded LSEG SmartEstimate’s estimate of 5.7 trillion won, which takes into account forecasts from more accurate analysts.
However, revenue fell short of expectations, likely up 11% from the same period a year earlier to 71 trillion won, below LSEG SmartEstimate’s estimate of 72.3 trillion won.
“With revenue largely in line with expectations but operating profit exceeding expectations, NAND flash chip inventory estimates may have improved. Demand for NAND has increased, which may have also led to higher profitability,” said Park Soon-soon, an analyst at Korea Investor. Relationship service.
“Initial reaction to the new Galaxy S24 smartphones has also been positive due to the AI built into them, so if a larger-than-expected share of high-margin premium smartphones sells, it will have an impact.”
The company is scheduled to release a detailed earnings report on April 30.
RISING PRICES FOR CHIPS
The stronger performance came as the chip division, traditionally the largest revenue generator, is expected to report its first quarterly profit in five quarters as memory chip prices rebounded from deep lows that began in mid-2022 from -due to weak post-pandemic demand for gadgets.
Prices for DRAM chips rose about 20% in the first quarter from the previous quarter, while prices for NAND flash memory chips rose 23% to 28%, according to data provider TrendForce.
A bullish demand outlook for memory chips, including growing demand for chips such as high-bandwidth memory (HBM) used in artificial intelligence chipsets, has sent Samsung shares up 29% over the past 12 months.
The magnitude 7.2 earthquake that hit Taiwan on Wednesday is likely to tighten semiconductor supplies, and analysts say memory chip makers Samsung and SK Hynix could raise prices more sharply than previously planned, potentially boosting profits in second quarter.
Samsung’s mobile business is likely to report solid profits after launching sales of its new flagship Galaxy S24 smartphones in late January, analysts said.
Eugene Investment & Securities estimates Samsung sold 57 million smartphones during the quarter, up 8% from the fourth quarter, and the average selling price of Samsung smartphones likely rose 30% to $340 quarter-on-quarter, supporting earnings.
According to data provider Counterpoint, global sales of the Galaxy S24 smartphones grew by 8% compared to last year’s Galaxy S23 series in the first three weeks of availability.
Samsung shares fell 0.5% in early morning trading, compared with a 0.4% fall in the broader South Korean market, tracking a U.S. market decline after Federal Reserve officials said they needed to rein in interest rate cuts.
($1 = 1,348.9300 won)