Samsung forecasts 931% jump in profit for Q1 on robust chip business

A man passes by Samsung Electronics' shop in Seoul on Wednesday, Jan. 31, 2024. [AP/YONHAP]

Samsung Electronics forecasts a 931.3 percent yearly rise in operating profit for the first quarter, signaling a dramatic turnaround for its semiconductor business.

In a preliminary earnings report released on Friday, the Suwon, Gyeonggi-based tech giant expects to post an operating profit of 6.6 trillion won ($4.9 billion), exceeding the market consensus of 5.3 trillion won compiled by market tracker FnGuide.

The company projects annual sales of 71 trillion won, up 11.4 percent on year. This forecast falls short of the market estimate of 72.6 trillion won.

The preliminary forecast does not include detailed breakdowns, but analysts speculate that Samsung’s rebounding chip business and a surge of smartphone sales led to the earnings surprise.

The company's chip business segment posted an operating loss of 4.6 trillion won during the same period of last year.

A Korea Investment & Securities report released on Friday anticipates Samsung’s semiconductor business to turn black with 1.89 trillion won of operating profit in the first quarter while the smartphone and network equipment division is expected to post 3.67 trillion won. The panel manufacturing business is anticipated to bring 450 billion won of profit, while consumer electronics will post 410 billion won.

“The rise of average selling prices for both dynamic random access memory and NAND flash memory chips is speculated to have brought profit rather than bit growth,” analyst Chae Min-sook of Korea Investment & Securities said. “DRAM sales already transitioned to profit during the last quarter, and the turnaround for NAND flash chips is expected to be shifted forward to accelerate improvements in chip business earnings.”

Analysts, on the other hand, forecast that the growth in chips might be hindered by stalled growth in the smartphone and network equipment sectors, despite strong sales of the company's Galaxy S24 series.

“Sales from Galaxy S24 series will have contributed to sales increases in the quarter, but in terms of profit, there would have been a slight increase in costs due to the burden of rising memory chip prices,” said Lee Su-rim of DS Investment & Securities.

Still, the overall analyst consensus projects a rosier future for the chipmaker.

“Particularly, the long-awaited commencement of high bandwidth memory chip supply to major North American customers, which has been an area of concern, is finally expected to begin within the next one and two months,” noted Meritz Securities analyst Kim Sun-woo.

The final earnings will be announced by the end of this month.

BY PARK EUN-JEE, LEE JAE-LIM [lee.jaelim@joongang.co.kr]