Samsung’s booming smartphone sales overcome chip production

Samsung Electronics forecast a nearly 45% increase in first-quarter profits on strong sales of smartphones and home appliances, helping to offset a severe blow caused by storms in its chip production in Texas.

Operating profit rose 44.2% year-on-year to Won9.3tn ($ 8.3 billion) in the January-March quarter, the South Korean tech group said on Wednesday. That would mark its biggest increase in the first quarter since 2018, in line with projections from analysts polled by Refinitiv. Samsung expects sales to increase 17.5% year on year to Won65tn.

Profits for the world’s largest maker of memory chips, smartphones and electronic displays are expected to improve over the next few quarters as chip prices continue to rise due to tight supply, analysts say. the global semiconductor offer has been criticized by the growing demand for electronic devices during the coronavirus pandemic and shortages caused by production shutdowns in the United States and Japan.

Analysts pointed to the strong performance of Samsung’s mobile division in the first quarter after the group launched a flagship smartphone and mid-priced models in January, about a month earlier than usual. Sales of high-end televisions and other high-margin consumer electronics also surged, as homebound consumers splashed onto home appliances.

The strong earnings also highlighted a full recovery for Samsung of the economic fallout from the pandemic, even though its operating profits were still about half of the level of its peak in the semiconductor cycle in 2018.

Samsung is estimated to have achieved around 23% of global smartphone sales between January and March. This compared to 16% in the previous quarter, when American rival Apple was boosted by the launch of its new iPhone, according to Counterpoint Research.

Kim Young-woo, analyst at SK Securities, estimated that operating profits for Samsung’s mobile division rose 66% to around 4.4 billion won as a group. continued to benefit US sanctions against Chinese competitor Huawei.

Seoul-based rival LG Electronics announced on Monday that it will do so to close its smartphone business at a loss after years of struggling to compete with Samsung, Apple and the low-cost Chinese upstarts.

“Samsung’s results in the mobile and home appliance divisions have been very strong thanks to early versions of its phones and lower production costs,” said Kim. “Its foundry business suffered losses due to a power outage at the Austin plant. But chip prices started to rise in March and will continue to rise in the second quarter. “

A massive snowstorm in texas in February, which caused widespread power outages, the Samsung chip factory in Austin was taken offline for more than a month. Analysts have estimated losses from the suspension of production to be between 300 billion and 400 billion won. The company said operations at the plant were almost back to normal by the end of March.

Last month, Samsung sounded the alarm after a “serious imbalanceIn the semiconductor industry, because a chip shortage that has disrupted automakers threatened to spill over into the wider tech sector.

Separately, LG forecast record quarterly results on Wednesday after strong sales of high-end home appliances. Its operating profit rose nearly 40 percent year-over-year to Won1.5tn while sales rose 28 percent to Won18.8tn, according to preliminary estimates from the company.

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