Samsung Electronics says first-quarter profit likely rose 44%, matching expectations

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) - Samsung Electronics Co Ltd on Wednesday said first-quarter profit likely rose 44%, with analysts attributing the surge to brisk sales of smartphones and TVs, albeit tempered by a likely fall in chip earnings after a storm halted U.S. output.

The South Korean technology giant forecast January-March operating profit of 9.3 trillion won ($8.32 billion), matching a weighted average analyst forecast from Refinitiv SmartEstimate.

Analysts said Samsung's mobile division likely saw operating profit soar more than 1 trillion won to about 4.15 trillion won after its flagship Galaxy S21 smartphone series outsold the previous version by a two-to-one margin in the six weeks since its January launch, according to research provider Counterpoint.

A lower starting price for the flagship helped sales for the world's largest smartphone maker during the quarter, with the S21 priced $200 lower than the S20, Counterpoint said.

Profit in Samsung's television set and home appliance business also likely more than doubled to around 1 trillion won, analysts said, due to continued stay-at-home demand.

Cross-town TV and home appliance rival LG Electronics on Wednesday announced its largest-ever preliminary quarterly operating profit of 1.5 trillion won for January-March.

In Samsung's chip division, analysts said profit likely fell 20% to 3.6 trillion won due to the cost of ramping up domestic production as well as losses at its Texas plant following a mid-February stoppage, blunting the benefits of strong demand.

U.S. memory chip peer Micron Technology Inc last month forecast third-quarter revenue above analyst estimates due to rising demand brought about by a global shift to remote work.

The price of DRAM chips widely used in laptops and other computing devices rose 5.3% in January-March from the previous three months, showed data from TrendForce. Analysts expect that trend to continue as a global chip shortage spurs on buyers to snap up supplies.

"Prices are likely to rise further in the current quarter due to solid demand for servers," said analyst Park Sung-soon at Cape Investment & Securities.

CHIP INTEREST

When Samsung announces detailed earnings later this month, "there will be interest in finding out how much Samsung is struggling in terms of low yields in its non-memory business, in addition to the extent of the losses in Texas and the U.S. pressure to increase chip investment," Park said, referring to the number of non-memory chips that pass quality tests.

Analysts have estimated that Samsung will invest about 10 trillion won in its chip contract manufacturing business this year, compared to about 6 trillion won last year.

Two top White House aides are set to host a meeting on April 12 with chipmakers and automakers in attendance on the state of the U.S. supply chain, Reuters previously reported. Samsung is considering a new $17 billion chip plant in the United States.

Samsung also said, in a preliminary earnings release without offering any breakdown of the figures, that revenue likely rose 17% from the same period a year prior to 65 trillion won.

Its share price traded down 0.2% after the release versus a 0.2% rise in the benchmark KOSPI. The stock has risen about 6.2% so far this year versus the KOSPI's 8.8%.

($1 = 1,118.2100 won)

(Reporting by Joyce Lee and Heekyong Yang; Editing by Christopher Cushing)