UPDATED 22:18 EST / OCTOBER 27 2021

INFRA

Samsung posts record quarterly revenue and profit on soaring memory chip demand

As expected, Samsung Electronics Co. Ltd. posted record-breaking third-quarter revenue and profit today thanks to rising prices of semiconductors and memory chips used in computers and mobile devices.

The company reported revenue of 73.98 trillion won ($63 billion) for the quarter, up 10% from the same period last year. Its net income rose to 12.06 trillion won ($10.3 billion), also up 10% from the year before.

Both numbers were higher than analysts’ estimates, with Wall Street looking for net income of just 11.54 trillion won. Samsung’s overall profit, meanwhile, grew by 26% to 15.82 trillion won ($13 billion).

The South Korean firm had disclosed its preliminary earnings results earlier this month, and today’s report confirmed those findings and provided a more detailed breakdown of its finances.

As always, Samsung’s semiconductor business provided the lion’s share of its revenue and profit. The world’s biggest maker of memory chips has seen strong demand for its products over the last 18 months or so thanks to the COVID-19 pandemic, and prices for semiconductors have been steadily rising over that time. Sales of memory chips were up 46% from the same quarter one year ago, while the unit’s profit almost doubled, to 10.06 trillion won, up from just 5.54 trillion won a year ago.

Samsung’s smartphone business also contributed to its success, with both shipments and sales prices up from the previous quarter. Handset sales were helped by the launch of Samsung’s new Z Series foldable phones, and also strong demand for its low- to midrange Galaxy smartphones.

The mobile display business saw its revenue jump by almost 30% thanks to “demand for newly launched products from major smartphone customers.” Samsung was, of course, talking about Apple Inc., which uses Samsung’s OLED displays in its new iPhone 13 lineup.

Samsung said it expects earnings from the mobile display business to go from strength-to-strength during the next quarter, noting demand not only from smartphone makers such as Apple, but also from those that make larger devices such as laptops, tablets and games consoles. Of note, Nintendo Co., Ltd. uses Samsung’s displays in its new Switch OLED console.

As for the not-so-positive news, Samsung warned that memory chip prices may start to cool in the coming quarter as some customers have managed to stockpile inventory. The company also flagged rising raw-materials costs as a possible risk to the semiconductor business unit’s profitability.

That said, Samsung has high hopes for its upcoming DDR5 memory chips that are said to be both faster and more power-efficient than previous generation chips. Kim Young-woo, an analyst at SK Securities, told Bloomberg the company’s 14-nanometer DDR5 chips are highly competitive and will be a “major boon” for Samsung when they go on sale. However, he also warned that a prolonged delay with Intel Corp.’s new Sapphire Rapids server processors that are slated to use DDR5, could affect demand.

Samsung is planning to invest billions of dollars into its semiconductor business and will soon initiate a more advanced chipmaking process. It recently announced it will begin making more powerful three-nanometer chips at its fabs during the first half of 2022, a roadmap that puts it ahead of its main rival Taiwan Semiconductor Manufacturing Co., which has plans to do so in the second half of that year.

Holger Mueller, an analyst with Constellation Research Inc., told SiliconANGLE that Samsung is now growing well beyond its pre-pandemic level.

“The pandemic has been good to Samsung, raising chip prices and boosting its profits,” he said. “But problems may now catch up with it on the supply side. Samsung has though shown remarkable cost restraint even with its big investments, increasing its profitability ahead of 2020 levels. Now all eyes are watching to see if Samsung can close the year with a strong finish.”

Photo: Samsung Electronics

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