Samsung expected to post record q1 profit on higher server chips

Samsung expected to post record q1 profit on higher server chips

SEOUL Reuters -- Samsung Electronics Co Ltd is expected to post a record fourth-quarter profit thanks to the solid demand for server memory chips and higher margins in contract manufacturing, analysts said. According to a Refinitiv SmartEstimate from 14 analysts, the company's biggest memory chip and smartphone maker's operating profit likely hit 15.2 trillion won $12.7 billion in the quarter ended December. It would be up 68% from 9.05 trillion won a year ago and only beat Q 4's record profit of 15.15 trillion won in 2017.

In the last two months, Samsung Electronics' shares have gone up about 12% in anticipation of higher memory chip prices this year, boosted by new data centres and demand for videos, games, conferencing and other streaming services.

Jeff Kim, analyst at KB Securities, said the semiconductor industry is likely to see demand increase in both memory and non-memory sectors.

As of December, major data centre companies in North America such as Amazon, Microsoft and Meta have increased memory chip orders. Samsung's foundry business appears to have won two years worth of orders until 2023, according to the company's foundry business. This view was supported by Micron Technology Inc's stronger than expected earnings results in December and its positive forecast for the following quarter.

Samsung's chip contract manufacturing business, which competes with Taiwan Semiconductor Manufacturing Co TSMC, has seen an improvement in profitability from the previous quarter to reach an operating margin between 10% and 20% due to more deliveries and higher prices, analysts said.

According to an average forecast of five analysts, Samsung's Q 4 chip profit is likely to reach 9.7 trillion won, more than double the previous year's 3.85 trillion won.

Analysts said that shipments for Samsung's mobile business, which was recently merged with a single Device Experience DX division with TV and home appliances, would likely increase slightly from the previous quarter due to easing component shortages.

The mobile business had a operating profit of about 3 trillion won, up about 24%, according to five analysts' averaged forecasts.

Market participants will be tuning in to Samsung's full results later this month for any updated impact on its Xian NAND flash chip manufacturing facilities, after the company said it would temporarily adjust operations there due to strict COVID- 19 curbs in the Chinese city.

TrendForce said last week Samsung's Xian plant was manufacturing without significant disruptions for now.