UK Markets closed

Samsung Electronics Q4 profit jumps on server chip demand, foundry margins

  • Oops!
    Something went wrong.
    Please try again later.
·2-min read
Samsung signage is seen in a store in Manhattan, New York City
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • SSNLF

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics Co Ltd said on Friday its fourth-quarter operating profit likely jumped 52% on-year to its highest for the quarter in four years, helped by solid demand for server memory chips and higher margins in chip contract manufacturing.

The world's largest memory chip and smartphone maker estimated October-December profit at 13.8 trillion won ($11.5 billion), which would be tech giant's highest fourth-quarter operating profit since Q4 2017.

The result missed a Refinitiv SmartEstimate of 15.2 trillion won, which analysts attributed to items such as employees' bonuses, marketing costs for its mobile business, and ramp-up costs for new display panels being included in the quarter.

"It looks like a shock because it came out less than the consensus, but I don't think it's as bad as it looks. It seems they reflected various costs in the fourth quarter," said Park Sung-soon, analyst at Cape Investment & Securities.

"It's unclear as of now if there were any changes in expected chip shipments," Park added.

Revenue likely rose 23% from the same period a year earlier to 76 trillion won, the company said in a short preliminary earnings release, in line with market expectations.

Samsung is due to release detailed earnings on Jan. 27.

Although prices of memory chips dipped during the quarter, increased demand from server clients lifted Samsung's quarter-on-quarter shipments of both DRAM chips, widely used in data centres, and NAND flash memory chips, used for data storage in tech devices, analysts said.

Samsung shares rose 1.3% in morning trade.

Samsung Electronics' shares have climbed about 11% since early November in anticipation of memory chip prices dipping less than expected during the first half of this year then rebounding, boosted by new data centres and demand for videos, games, conferencing and other traffic-heavy services.

Samsung's logic chip business, which includes chip contract manufacturing that competes with Taiwan Semiconductor Manufacturing Co (TSMC), is also expected to post a jump in operating profit to above 1 trillion won in the December quarter due to more deliveries and higher prices, Hanwha Investment & Securities analyst Lee Soon-hak said.

Estimated smartphone shipments by Samsung's mobile business were about 67 million, near 69.3 million in the previous quarter, Counterpoint Research said, helped by easing component shortages, although marketing costs weighed.

The business was recently merged into a single Device Experience (DX) division along with TV and home appliances.

($1 = 1,204.0400 won)

(Reporting by Joyce Lee and Heekyong Yang; Additional reporting by Choonsik Yoo; Editing by Richard Pullin)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting