Samsung earnings prime estimates on chip demand, new handsets

Samsung Electronics Co reported preliminary earnings for the primary quarter that beat analysts’ estimates on sturdy demand for brand new smartphone fashions and reminiscence chips that go into servers.

Operating revenue elevated 50% to 14.1 trillion gained ($11.6 billion) for the three months ended March, South Korea’s greatest firm mentioned Thursday in a press release. Analysts estimated 13.4 trillion gained on common. Sales superior 18% to 77 trillion gained, additionally larger than anticipated. Samsung will present internet earnings and divisional efficiency when it reviews full earnings on Apr. 28.

Shares opened barely down in Seoul amid a broader selloff following feedback from the US Federal Reserve.

Samsung is the primary main tech firm to report numbers for the primary quarter, a interval disrupted by conflict in Ukraine, sanctions on Russia and resurgent Covid-19 infections in China. Still, datacenter expansions and the worldwide shift to 5G communications proceed to spur demand for semiconductors that account for a big chunk of the conglomerate’s revenue.

“We expect solid earnings growth in 2022 on the back of healthy earnings rebound in semiconductor and display in 2H 2022,” Peter Lee, an analyst at Citigroup, mentioned in a notice forward of the outcomes. “Specifically, we expect Samsung’s memory business to benefit from the memory pricing strength throughout 2H 2022.”

In smartphones, one other Samsung development pillar, cumulative gross sales of the Galaxy S22 collection are prone to exceed a million items in South Korea this week, the corporate mentioned.

The new flagship lineup, which made its debut in February, is promoting at a 20% quicker clip than the earlier S21 collection, in keeping with the Suwon-based agency. In the US, the S22 offered 60% greater than the S21 in its first three weeks in the marketplace, in keeping with analysis agency Counterpoint.

Shares of Samsung had misplaced about 12.5% thus far this yr by way of Wednesday, with the broader chip sector underperforming as rising financial dangers clouded the outlook for shopper demand. Surging oil costs within the wake of Russia’s invasion of Ukraine together with inflation and interest-rate hikes have pushed concern about dwindling disposable earnings and discretionary spending.

Samsung, which produces greater than a 3rd of the world’s DRAM and NAND reminiscence chips, is affected not solely by the cycles of the semiconductor business but additionally by demand from shoppers because it makes each the tip merchandise as properly the chips that go into these devices.

The reminiscence market is exiting a downturn sooner than anticipated, with costs dropping solely modestly within the first quarter. DRAM costs fell 4%, lower than the 6% projected, whereas NAND declined 3%, in keeping with Citigroup. NAND costs are anticipated to rise 5% to 10% within the present quarter as provide has tightened after a contamination challenge at Kioxia Holdings Corp and Western Digital Corp’s three way partnership fabs in Japan, analysis agency TrendForce predicted.

The price of producing chips has additionally grown as chipmakers are having to diversify sources of gases and minerals that was once imported largely from Ukraine.

China’s lockdown insurance policies are inflicting logistics disruption, which can damage the sourcing of elements and delay the manufacturing of devices that use Samsung reminiscence. Analysts have additionally cited the comparatively gradual enchancment in Samsung’s manufacturing yields of superior nodes for contract-based chipmaking as a draw back threat for the inventory.

What Bloomberg Intelligence Says

China smartphone and PC shipments could also be disrupted by Covid-19 outbreaks in enterprise hub Shanghai and ensuing logistics headwinds. 5G handset market share within the nation might keep at about 80% within the coming months however additional upside could also be restricted as rising prices might hinder adoption in entry-level fashions – Steven Tseng and Sean Chen, BI analysts.

Read: Samsung to reorganise shopper enterprise

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