(Bloomberg) -- Samsung Electronics Co.’s profit missed analysts’ estimates and the company warned of weaker first-quarter results as smartphone competition intensified and memory prices remained weak.South Korea’s biggest company reported net income in the three months ended December of 6.45 trillion won ($5.84 billion), missing the 7.3 trillion won average of estimates compiled by Bloomberg. Samsung also announced it’ll increase its annual dividend payout to 9.8 trillion won and continue to return 50% of free cash flow to shareholders between 2021 and 2023.Shares fell as much as 2.8% in Seoul on Thursday before recovering.Profit from Samsung’s semiconductor business fell short of estimates because of low memory chip prices, although the company said it expects a recovery in the first half. In the smartphone business, the world’s largest handset maker struggled in the holiday period as Apple Inc. introduced its first 5G-capable iPhones and Chinese rivals put up fierce competition.With a lot of good devices on the market, “there is only so much that Samsung can grab out of it,” said Kiranjeet Kaur, research manager at IDC.Samsung will expand the capacity of its foundry business, which fabricates chips for clients like Nvidia Corp., to meet demand and overcome current supply shortages. It will also “actively” use resources for further strategic facility expansion and “meaningful” acquisitions, the company said.Preliminary numbers released earlier this month showed Samsung’s operating profit rose by 26%.A strong won and costs associated with new production lines weighed on Samsung’s semiconductor business, the company said. Operating profit for the semiconductor unit was 3.85 trillion won, short of the 4.62 trillion estimate from analysts. Currency headwinds and uncertainty around the spread of Covid-19 are likely to have an ongoing negative impact, Samsung warned.Read more: Samsung Surges to New High on Strong Memory Market OutlookDemand for more powerful 5G smartphones along with server inventory buildup is expected to drive a long-awaited rebound in memory chip prices and “analysts are busy upgrading their memory price estimates,” said Yungsan Choi, analyst at Ebest Investment & Securities. Component supplier Murata Manufacturing Co. and chipmaker MediaTek Inc. both anticipate more than half a billion 5G handsets to be shipped this year.Samsung’s business is showing signs of growth at a time when its de-facto leader, billionaire heir Jay Y. Lee, is back in prison following his sentencing on bribery charges. Its foundry business and display panel division both posted quarterly records. The company anticipates “robust” sales of smartphones, having launched its new Galaxy flagship handset family earlier than usual this year.Chipmakers Intel Corp. and Micron Technology Inc. gave a bullish forecast for the first quarter of this year on continued demand for computers and phones that enable working and studying from home. Taiwan Semiconductor Manufacturing Co. is planning another record-breaking year of investment with as much as $28 billion set aside to expand and improve its production capacity at a time of silicon supply shortages affecting everyone from global automakers to mobile tech giants like Apple Inc. and Qualcomm Inc.Samsung’s contract chip manufacturing is expected to expand with the addition of Intel as a customer. The two companies have discussed development and production of Intel’s mainboard chipsets over the last two years and Samsung will produce the chipset at its Austin, Texas plant starting from this quarter, Meritz Securities said in a note.Samsung Is Said to Mull $10 Billion Texas Chipmaking PlantThe existing Austin fab is capable of operating on a 14-nanometer process. With rising expectations of growth in the foundry market, Samsung is considering building a cutting-edge logic chipmaking plant in the region that would be capable of fabricating chips as advanced as 3nm in the future, Bloomberg News reported earlier.(Updates with details from earnings call from second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.