Samsung more likely to report finest This autumn revenue on strong chip demand By Reuters
© Reuters. FILE PHOTO: The Samsung Electronics logo can be seen in its office building in Seoul, South Korea, South Korea, October 11, 2017. REUTERS / Kim Hong-Ji / File photo GLOBAL BUSINESS WEEK AHEAD
From Joyce Lee
SEOUL (Reuters) – Samsung Electronics (OTC 🙂 Co Ltd is likely to post record earnings in the fourth quarter thanks to solid demand for server memory chips and higher margins in contract manufacturing, analyst estimates show. Operating profit of the world’s largest manufacturer of memory chips and smartphones was expected to reach 15.2 trillion won (12.7 billion won) in the quarter through December, an increase of 68% from 9.05 trillion won in the previous year and just above the previous record profit of the fourth quarter of 15.15 trillion won reported in 2017.
Samsung (KS 🙂 Electronics’ shares are up about 12% over the past two months in anticipation of higher memory chip prices this year, fueled by new data centers and demand for video, games, conferences, and other streaming services.
“Contrary to previous concerns, the semiconductor industry is likely to see a significant increase in customer demand in both the storage and non-storage sectors,” said Jeff Kim, an analyst at KB Securities.
“By December, large data center companies in North America like Amazon (NASDAQ :), Microsoft (NASDAQ 🙂 and Meta had steadily increased their orders for memory chips … orders through 2023.”
That view was supported by unexpectedly strong earnings results from peer Micron Technology Inc (NASDAQ 🙂 in December and its positive outlook for the following quarter.
According to analysts, Samsung’s chip-to-order manufacturing business, which competes with Taiwan Semiconductor Manufacturing Co (TSMC), has also seen significantly improved profitability from the previous quarter, hitting an operating margin between 10% and 20%, driven by more shipments and higher prices.
According to an average forecast by five analysts, Samsung’s chip earnings are expected to reach 9.7 trillion won in the fourth quarter, more than double the 3.85 trillion won last year.
The South Korean tech giant will announce preliminary results on Friday.
For Samsung’s wireless business, which was recently merged into a single Device Experience (DX) division with TV and home appliances, analysts said shipments were likely to have increased slightly quarter-on-quarter due to easing component shortages.
According to the average forecast of five analysts, the wireless business was likely to have operating income of about 3 trillion won, up about 24%.
Market participants will be preparing for full results from Samsung later this month to see the current impact on its Xian NAND flash chip manufacturing facilities after the company announced it would operate there due to strict COVID-19 restrictions temporarily adjust in the Chinese city.
Data company TrendForce said last week that Samsung’s Xian plant was producing without any noticeable interruptions for the time being.
($ 1 = 1,193,000 won)
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