Samsung Electronics up 8.6% despite lower operating profit

Samsung Electronics rose by as much as 8.6 per cent in Seoul Friday as growing expectations for its memory business overshadowed operating profit that came in below analysts’ projections.

South Korea’s biggest company posted a 26 per cent increase in operating income to 9 trillion won (€6.8bn) for the three months ended December in preliminary results released Friday.

That compares with a 9.52 trillion won average of analyst forecasts. Sales for the quarter were 61 trillion won. The company didn’t provide net income or break out divisional performance, which it will report later this month when it releases final results.

Fellow memory chipmaker Micron Technology Inc. issued a bullish forecast this week, predicting that the need for dynamic random access memory will likely exceed supply this quarter.

The tightness of supply in DRAM is already driving up prices, according to chief executive Sanjay Mehrotra. His company and Samsung will be competing for a share of what’s expected to be a broad recovery in demand, led by the automotive sector and increased usage of more advanced, resource-intensive applications like artificial intelligence.

“We believe memory pricing recovery will take place not only for DRAM but also for NAND” this year, Citi analysts wrote in response to Samsung’s results, citing limited supply growth, low inventories and tight capacity.

Galaxy smartphone sales were weaker over the past quarter as Apple released its first 5G-compatible iPhones and Chinese rivals launched aggressive campaigns to secure the market share vacated by Huawei Technologies Co.’s sanction-stricken consumer business.

Samsung shipped 41 million 5G devices in the past year, according to Strategy Analytics estimates, lagging behind Apple’s 52 million and Huawei’s 80 million sold largely at home in China.

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The Suwon-based company plans to unveil its next flagship series, the Galaxy S21, earlier than its usual annual schedule with a January 14th online event. Competitors like Xiaomi, Oppo and Vivo are aggressively positioning themselves to fill the void expected to be left by Huawei in international markets.

Memory chip prices fell in the fourth quarter owing to a slowdown in server demand and a stronger Korean won during the period also eroded Samsung’s earnings.

“Samsung’s OP was affected by the currency issue and costs for a new fab,” said MS Hwang, analyst at Samsung Securities. “The strong earnings and outlook of Micron indicates Samsung’s earnings might have not been too bad. The chip market is on track to recover.”

“Sustained demand in 1H for cloud servers, smartphones and PCs, followed by increased IT spending in 2H, could spur DRAM bit growth of more than 20 per cent. DRAM gigabytes per device may keep expanding amid AI and 5G use.” – Bloomberg


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