Quarterly profits increased by 50%, both smartphones and memory chips made money

Bloomberg reports, Samsung Electronics has just reported preliminary profit for the first quarter of the year. And the results surpassed all analysts’ forecasts previously thanks to strong demand for new smartphone models and the company’s memory chips.

Specifically, Samsung’s operating profit increased 50% year-on-year to 14.1 trillion won ($11.6 billion) in the three months ending March 2022. Analysts had previously forecast only 13.4 trillion won. The company’s revenue rose 18 percent to 77 trillion won, also beating forecasts. Samsung will provide net profit and performance details for each business segment when it releases its overall report on April 28.

Samsung is the first major technology company to report first-quarter business results, which is said to be a difficult quarter due to the Russia-Ukraine conflict, followed by the re-emergence of the Covid-19 epidemic in China. However, the expansion of data centers and the world’s shift to 5G technology continue to boost demand for memory chips, which make up the majority of Samsung’s profits.

“We expect earnings growth in 2022 to see a strong recovery in the semiconductor and display segments,” said Peter Lee, an analyst. “In particular, we expect Samsung’s memory chip business to benefit from the sharp increase in memory chip prices.”

In the mobile segment, another growth spur for Samsung, preliminary sales of the Galaxy S22 surpassed 1 million units in South Korea this week. According to the company’s statistics, the new product line – launched in February has sold 20% faster than the previous S21 series. In the US, the S22 sold 60% faster than the S21 in the first 3 weeks on the market.

Samsung shares have lost 12.5% ​​of their value this year through Wednesday on worries that the chip sector could weaken as rising global economic risks dent demand. Rising oil prices coupled with inflation made people worried about earnings.

Samsung, which makes more than a third of the world’s NAND and DRAM chips, is also affected not only by the cycles of the semiconductor industry, but also by customer demand as they make both end products and like the chips that come with these devices.

The chip market pulled out of its downtrend earlier than expected as prices fell only slightly in Q1. DRAM prices fell 4%, less than 6% expected while NAND prices fell 3%. NAND is also expected to grow by 5-10% in the current quarter.

Chip production costs also increase as chip manufacturers are having to diversify their sources of raw materials. China’s ZeroCovid policy is disrupting logistics – hurting parts supply and slowing down production.

Source: Bloomberg