Samsung Electronics achieves record sales in first quarter

Samsung Electronics Galaxy S22 phones are displayed in retail shop in southern Seoul on Thursday. [YONHAP]

Samsung Electronics reported record quarterly revenue and expectation-beating operating profits in a preliminary first-quarter earnings announcement on Thursday.

The strong results were driven by healthy smartphone sales and a lower-than-expected decline in the price of dynamic random access memory (DRAM) chips.

The world's biggest smartphone and memory chip maker is forecasting an operating profit of 14.1 trillion won ($11.6 billion) in the January-to-March period, up 50.32 percent on year.

If confirmed in formal results to be released later, the operating profit would be the best in almost four years and above market expectations of 13.1 trillion won.

At the top of the semiconductor cycle in the third quarter of 2018, the tech company posted 17.6 trillion won of operating profit.

According to Thursday's guidance, sales in the first quarter of 2022 hit an all-time quarterly high of 77 trillion won, up 17.76 percent on year, despite unfavorable seasonality — first quarter smartphone sales are normally sluggish — and the Russia-Ukraine war, which forced the company to suspend product shipments to Russia last month.

The sales figure beat the consensus estimate of 75.3 trillion won.

Neither segmentation nor net profit were provided in the guidance released by the company.

Analysts say that the strong results were led by semiconductors, which benefited from solid demand for memory chips used in servers. But demand for PC and smartphone chips remained moderate due to high inventories.

DRAM chip-price declines were in the mid-single-digit range, less steep than anticipated, according to Doh Hyun-woo, an analyst at NH Investment & Securities.

The effect of the drop was less than it might have been as the company "maintained a conservative stance on facility investment and focused on the supply of high-end memory products," Doh said.

The analyst noted that the foundry, or contract chipmaking, division was likely not a factor in the strong performance as the company has faced low production yields in chips manufactured by the division.

Kim Sun-woo, an analyst at Meritz Securities, forecasts 8.7 trillion in operating profit from the company's semiconductor division in the first quarter and 3.6 trillion won from the mobile communications division, which includes smartphones and network equipment.

The successful February introduction of Galaxy S22 devices supported performance in the company's mobile communications business.

Samsung Electronics said that over 900,000 of the company's latest smartphones were sold between Feb. 14 and early this month and that the 1-million-unit mark will be broken by April 8.

Globally, Kim projects that the manufacturer shipped 7.9 million Galaxy S22 phones in the first quarter, lower than his estimate of 10.7 million.

He forecasts that 73 million Galaxy phones of all types were sold in the first quarter.

The display business is expected to generate 1 trillion won in operating profit and 700 billion won in the consumer electronics division.

Shares of Samsung Electronics slid 0.73 percent to close at 68,000 won Thursday following the announcement of the guidance in the morning.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]