Samsung Electronics Co. reported preliminary earnings for the first quarter that beat analysts’ estimates on robust demand for new smartphone models and memory chips that go into servers.Operating profit increased 50% to 14.1 trillion won ($11.6 billion) for the three months ended March, South Korea’s biggest company said Thursday in a statement. Analysts estimated 13.4 trillion won on average.
Sales advanced 18% to 77 trillion won, also higher than expected. Samsung will provide net income and divisional performance when it reports full earnings on Apr. 28.Shares opened slightly down in Seoul amid a broader selloff following comments from the U.S.
Federal Reserve.Samsung is the first major tech company to report numbers for the first quarter, a period disrupted by war in Ukraine, sanctions on Russia and resurgent Covid-19 infections in China.Still, datacentre expansions and the global shift to 5G communications continue to spur demand for semiconductors that account for a large chunk of the conglomerate’s profit.
“We expect solid earnings growth in 2022 on the back of healthy earnings rebound in semiconductor and display in 2H 2022,” Peter Lee, an analyst at Citigroup, said in a note ahead of the results.“Specifically, we expect Samsung’s memory business to benefit from the memory pricing strength throughout 2H 2022.”In smartphones, another Samsung growth pillar, cumulative sales of the Galaxy S22 series are likely to exceed one million units in South Korea this week, the company said.
The new flagship lineup, which made its debut in February, is selling at a 20% faster clip than the previous S21 series, according to the Suwon-based firm.In the U.S., the S22 sold 60% more than the S21 in its first three weeks on the market, according to research firm Counterpoint.Shares of Samsung had lost about 12.5% so far this year through Wednesday, with the broader chip sector underperforming as rising economic risks clouded the outlook for consumer demand.
Surging oil prices in the wake of Russia’s invasion of Ukraine along with inflation and interest-rate hikes have driven concern about dwindling disposable income and discretionary spending.Samsung, which produces more than a third of the world’s DRAM and NAND memory chips, is affected not only by the cycles of the semiconductor industry but also by demand from consumers as it makes both the end products as well the chips that go into those gadgets.The memory market is exiting a downturn earlier than expected, with prices dropping only modestly in the first quarter.
DRAM prices fell 4%, less than the 6% projected, while NAND declined 3%, according to Citigroup.NAND prices are expected to rise 5% to 10% in the current quarter as supply has tightened after a contamination issue at Kioxia Holdings Corp. and Western Digital Corp.’s joint venture fabs in Japan, research firm TrendForce predicted.