SEOUL: Samsung Electronics Co Ltd said on Friday that its fourth-quarter operating profit would likely jump 52 per cent year-on-year to its highest for the quarter in four years, helped by solid demand for server memory chips and higher margins in chip contract manufacturing.
The tech giant's highest fourth-quarter operating profit since Q4 2017 was predicted by the world's largest memory chip and mobile maker in October-December profit at 13.8 trillion won US $11.5 billion.
The result missed a Refinitiv SmartEstimate of 15.2 trillion won, which analysts attributed to items such as employees' bonuses, marketing costs for its mobile business, and ramp-up costs for new display panels included in the quarter.
It looks like a shock because it came out less than the consensus, but I don't think it's as bad as it looks. Park Sung-soon, analyst at Cape Investment Securities said that they reflected various costs in the fourth quarter.
Park said there was no change to expected chip shipments as of now.
Revenue was likely to increase 23 per cent from the same period a year ago to 76 trillion won, the company said in a short preliminary earnings release.
There is a chance that Samsung will release detailed earnings on January 27.
While prices of memory chips dipped during the quarter, increased demand from server clients lifted Samsung's quarter-on-quarter shipments of both DRAM chips, widely used in data centres and NAND flash memory chips, used for data storage in tech devices, analysts said.
Since early November, Samsung Electronics' shares have climbed almost 11 per cent in anticipation of memory chip prices falling less than expected during the first half of the year then rebounding, boosted by new data centres and demand for videos, games, conferencing and other traffic-heavy services.
In December, the company's logic chip business, which includes chip contract manufacturing, is expected to see a jump in operating profit to above 1 trillion won due to more deliveries and higher prices, according to Hanwha Investment Securities analyst Lee Soon-hak.
In the previous quarter, 67 million phone shipments by Samsung's mobile business were near 69.3 million, easing component shortages, although marketing costs weighed in, according to Counterpoint Research.
The business was recently merged with TV and home appliances into a single Device Experience DX division.