Samsung Forecasts Record First-Quarter Revenues
Profits are also projected to rise over prior year
SEOUL— Samsung Electronics Co. forecast record quarterly revenues and a 50% rise in first-quarter operating profits over the prior year, owing to strength for memory chips and a robust rollout of its latest flagship smartphones.
Samsung’s performance speaks to how the prolonged chip shortage continues to boost business for tech suppliers. But sales of the South Korean tech giant’s memory chips and smartphones could face risks of decline in the months ahead as factors including the Russia-Ukraine war and record inflation could dampen consumer sentiment.
On Thursday, the world’s largest maker of memory chips and smartphones said it forecasts operating profit of 14.1 trillion South Korean won, equivalent to about $11.6 billion, for the quarter ended March 31. That compares with 9.4 trillion won for the year-earlier quarter.
Revenue is expected to reach 77 trillion won, up about 18% from the prior year. It would mark Samsung’s highest ever quarterly revenue, just topping the prior record of 76.6 trillion won set in the prior quarter.
Samsung’s outlook topped market expectations. Analysts polled by S&P Market Intelligence were expecting on average 13.5 trillion won in operating profit and 74.9 trillion won in revenue.
The Suwon, South Korea-based company reports full earnings later this month. Samsung is considered a bellwether for the tech world as it is both a major electronics maker and a supplier to consumer-electronics rivals including Apple Inc. and Sony Group Corp.
Samsung generates most of its operating profit from semiconductors and has a dominant position in memory chips that give devices their multitasking ability and data storage.
Prices of the two major types of memory chips—both DRAM and NAND flash—in the first quarter remained higher than the same point last year. But production hold ups due to shortages of other types of semiconductors have led to some pullbacks in memory demand from the prior quarter, said Sanjeev Rana, a Seoul-based senior analyst at brokerage CLSA. But memory prices held up better than expected, propping up profits, he said.
DRAM prices could decline by up to 5% in the second quarter, from the prior three-month period, due in part to weaker consumer demand for tech gadgets because of inflation and unknown economic fallout from the continuing Russia-Ukraine war, according to TrendForce, a Taiwan-based tech-market researcher.
But NAND flash prices are expected to rise by 5% to 10% in the second quarter as supply became tighter following a raw-material contamination that disrupted production at Japan’s Kioxia Holdings Corp. and Western Digital Corp. in early February, TrendForce projects.
Samsung is also expected to have gotten a boost from its latest lineup of Galaxy S22 flagship smartphones, which made its debut in February. The South Korean firm kept prices the same as last year’s models. But the premium devices, which bring in the highest margins, are the main drivers of the company’s smartphone profits.
Global demand is 20% higher for the Galaxy S22 than its predecessor, based on the first six weeks of sales, Samsung recently said.
Samsung is the largest smartphone vendor in Russia with a 30% market share as of the fourth quarter of 2021, according to Counterpoint Research. Last month, the company said it had suspended shipments of all of its products to the country because of geopolitical developments and was monitoring the situation.