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Samsung Electronics expects a strong second quarter

Published: 07 Jul. 2021, 18:44 Updated: 07 Jul. 2021, 19:24

Samsung Electronics' semiconductor engineers at the company's plant in Hwaseong, Gyeonggi [SAMSUNG ELECTRONICS]

Samsung Electronics reported a preliminary 53.4 percent rise on year in quarterly operating profit as demand for chips balanced weakness in the mobile communications business.

The company expects an operating profit of 12.5 trillion won ($11.0 billion) in the second quarter, according to an announcement on Wednesday.

It is a record for the company for a second quarter, the highest since the third quarter in 2018 and above the analyst consensus of 10.9 trillion won.

In the provisional earnings statement, Samsung Electronics reported second quarter sales of 63 trillion won, up 18.9 percent on year and above analyst expectations of 61.3 trillion won.

Neither net profit nor segmentation were provided.

Analysts say that the company’s chip business drove the results as prices of most microchips, including memory chips and microprocessors, have been on the rise amid global shortages.

Doh Hyun-woo, an analyst at NH Investment & Securities, forecast that semiconductors brought in 7.1 trillion won of operating profit, up 109 percent on quarter and 130.2 percent on year.

“The upbeat performance was led by the chip business with the increased shipment of dynamic random access memory (DRAM) for PCs and servers,” Doh wrote.

He noted that the company’s shipments of DRAMs increased by 12 percent between April and June on year with the average selling price rising by 16 percent.

Shipments of NAND Flash memory chips jumped by 12 percent during the same period, and the average selling price rose 5 percent.

Most analysts forecast 7 trillion won to 8 trillion won of operating profit in the second quarter for the company's semiconductor division on demand from data centers and manufacturers of a wide range of electronic devices, such as PCs and tablets.

That would return the company's chip division to being its most profitable after being eclipsed by the smartphone division in the first quarter.

The smartphone business generated about 3 trillion won of operating profit, according to analysts. In the first quarter, the mobile communication department, which covers smartphones and network equipment, posted operating profit of 4.39 trillion won.

Doh added that lower production capacity at major smartphone factories in Vietnam and India also weighed on the results after the resurgence of the pandemic forced the operations below maximum.

The display division will likely report 1.2 trillion won of operating profit after a one-off gain, according to Song Myung-seob, an analyst at Hi Investment & Securities.

“One-time compensation of 800 billion won from Samsung’s largest display client, which was expected to be recorded in the third quarter, appears to be reflected in the second quarter,” the analyst said, referring to Apple.

Operating profit from consumer electronics may have been around 1 trillion won.

BY PARK EUN-JEE [[email protected]]