Samsung Electronics Co. (Yonhap)
Samsung Electronics Co. is expected to report robust earnings in the first quarter of the year, analysts here said Thursday, as its mobile business has apparently offset relatively sluggish performance from its semiconductor unit.
The South Korean tech titan was projected to log 60.64 trillion won (US$53.7 billion) in sales in the first three months of 2021, up 10.9 percent from a year earlier, while operating profit was estimated to surge 38.8 percent on-year to 8.95 trillion won over the period, according to the data from 12 local brokerage houses compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency, last month.
On a quarter-on-quarter basis, Samsung's sales and operating profit were expected to go down 0.32 percent and 1.06 percent, respectively.
Samsung, the world's largest memory chip and smartphone producer, will announce its first quarter earnings guidance next week.
Analysts said Samsung's set business, comprising the IT & Mobile Communications (IM) and Consumer Electronics (CE) divisions, anchored the company's strong performance in the January-March period and offset lukewarm earnings from its component business that includes semiconductors.
They predicted Samsung's chip business would post around 3.5 trillion won in operating profit in the first quarter.
Samsung's memory business benefited from a rise of DRAM prices, but its logic chip and foundry businesses took a beating from a monthlong shutdown of the company's plant in Austin, Texas, where a severe winter storm caused a power outage in mid-February, according to the analysts.
Market watchers estimated that the shutdown has cost Samsung more than 300 billion won, with normal productions to resume later this month.
"Operating disruptions from its Texas plant, lower-than-expected yield rates from 8-nanometer and 5-nanometer processes, and cost increase from ramp up of the DRAM 1z-nanomter process and NAND facility in Xian, China, made Samsung post relatively tepid performance in the semiconductor sector," Lee Seung-woo, an analyst at Eugene Investment Securities, said.
Samsung's mobile business was tipped to report an earnings surprise in the January-March period on the back of its Galaxy S21 flagship smartphone series.
Samsung has been introducing new Galaxy S devices in mid-February each year, but this year, the company released the S21 in January with lower price tags. Analysts forecast that worldwide shipments of the Galaxy S21 surpassed 10 million units worldwide in the first quarter.
"We expect Samsung's total smartphone shipments in the first quarter to reach around 75 million units, which is up 20.4 percent from the previous quarter," Kim Kyung-min, an analyst at Hana Financial Investment said.
"The average selling price of its mobile products is also expected to rise 27.1 percent quarter-on-quarter."
Samsung's CE division, which manages TV and home appliance products, was also expected to log strong earnings in the first quarter as the pandemic-induced stay-at-home economy continues.
The CE division's operating profit may reach up to 1 trillion won in the first three months of the year, with solid demand of premium products.
"There is demand from the stay-at-home trend, with people shopping for large size TVs," Hwang Min-seong, an analyst at Samsung Securities, said. "The business is likely to have maintained great profitability in the first quarter with cost minimizing efforts."
Samsung's display panel business was expected to log around 500 billion won in operating profit.
"Early release of its flagship smartphone and solid demand of the iPhone helped its OLED business, while its LCD business could have improved earnings from a year earlier due to strong panel prices," Kim Yang-jae, an analyst at KTB Investment & Securities, said.
Looking ahead, industry observers said Samsung's earnings will further improve in the second quarter of the year as its main cash cow semiconductor business is forecast to recover.
With Samsung's Austin plant expected to operate at normal levels, analysts predicted that increasing prices of memory chips will lead the growth.
Market researcher TrendForce said contract prices of NAND flash are expected to increase by an average of 3-8 percent in the second quarter of 2021 from the previous three month, while that of DRAM are to rise 13-18 percent quarter-on-quarter in the April-June period.
"Despite shipment decline of high-end smartphones in the second quarter, it is expected that Samsung's chip business will see a sharp increase in profits with an estimate-beating average selling price hike," Song Myung-sub, an analyst at Hi Investment & Securities, said.
"Samsung's display panel business could also see growth in profits if its client pays a penalty (over order shortfalls) and there is also a possibility that the company could reflect compensation from the Texas state government over a power outage at the Austin plant." (Yonhap)