Samsung Elec shares jump on upbeat chip outlook as fourth-quarter profit rises

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) - Samsung Electronics Co Ltd shares jumped on Friday after it said its fourth quarter operating profit likely rose 26% as coronavirus pandemic driven remote working and TV-watching fuelled sales of chips and display panels.

Samsung Electronics shares rose as much as 8.6% in afternoon trade to a record high, compared to a 3.9% rise in the wider market, due to an earlier-than-expected rebound in memory chip prices, analysts said.

"DRAM chip prices appear to be turning around now, rather than later in the year as we expected," said Song Myung-sup, analyst at HI Investment & Securities.

Samsung's shares have risen about 67% since September, boosted by a global shortage of chips that has forced firms to scramble to secure production capacity from contract chip manufacturers, or foundries.

The 9 trillion won ($8.24 billion) estimate provided by the South Korean tech giant for profit in the December quarter was in line with a 9.1 trillion won analyst forecast by Refinitiv SmartEstimate despite weaker smartphone sales, marketing costs and a strong won versus U.S. the dollar.

That analyst forecast was trimmed back from 9.5 trillion earlier in the week.

Samsung, the world's biggest memory chip supplier and maker of smartphones, also said revenue likely rose 1.9% to 61 trillion won.

The company provides only estimates of quarterly revenue and operating profit in its preliminary earnings release. Full earnings are due later this month.

"Work-from-home will become entrenched," said Park Sung-soon, analyst at Cape Investment & Securities. "Samsung's supply comments, and investments in non-memory chips, will be issues to watch out for when full results are announced."

Park said analysts would be closely watching for an update on an earthquake in Taiwan last month that briefly stopped memory chip production at rival DRAM makers. While demand usually rises in response to a supply disruption, researcher TrendForce said the earthquake did not seem to have caused any tangible capacity losses.

Analysts expect Samsung to report a jump in memory chip shipments in the December quarter, compared with the prior quarter, offsetting lower prices.

Those prices will likely rebound in the current quarter, analysts said, as data centre customers return to buying chips, as well as demand from 5G smartphones, notebooks, graphics and automotive.

South Korea expects semiconductor exports to rise more than 10% in 2021, as the pandemic encourages companies to add bandwidth for remote work and consumers to buy devices.

U.S. memory chip peer Micron Technology Inc on Thursday forecast second-quarter revenue above Wall Street estimates.

SMARTPHONE SLUMP

On the flip side, Samsung likely recorded an estimated 17.5% drop in smartphone shipments in the December quarter compared to the previous quarter, Counterpoint Research said, due to a high base from brisk sales in the September quarter and competition from Apple's new iPhone 12.

Samsung is expected to unveil its latest flagship smartphone next week. That would be earlier than in past years, a strategy Counterpoint said was likely aimed at filling the vacuum left by Huawei Technologies losing market share after U.S. government regulations restricted supplies.

A strong won against the U.S. dollar also dented profits. Samsung makes the bulk of its profits in dollars but reports in won.

($1 = 1,093.0600 won)

(Reporting by Joyce Lee and Heekyong Yang; Editing by Jane Wardell)