Samsung Electronics Co Ltd on Wednesday reported a likely 53% jump in second-quarter operating profit, beating market estimates on the back of strong chip prices and demand despite lower smartphone sales.
The preliminary result is up 33% from the first quarter and underscores the soaring demand for chips that has depleted stockpiles amid a pandemic-led consumer appetite for electronics and recovering investment in data centers.
The world's largest memory chip and smartphone maker said profit for the quarter ended June 30 was likely 12.5 trillion won ($11 billion), well above a Refinitiv SmartEstimate of 11.3 trillion won. If confirmed later this month, it would be the tech giant's biggest second-quarter profit since 2018.
"Third-quarter profit is expected to be even higher on strong mobile DRAM memory chip prices, and peak seasons for mobile and display businesses," Reuters quoted Park Sung-soon, analyst at Cape Investment & Securities, as saying.
For the second quarter, Samsung's chip division profit likely jumped by a fifth or more from a year earlier, analysts said, helped by strong memory-chip prices and demand for consumer electronics and from data center customers.
Samsung's memory chip shipments, especially for DRAM chips widely used in servers, mobile phones and other computing devices, were larger than expected, contributing to chip profits that dwarfed a steep quarter-over-quarter fall in smartphone shipments.
Improved yield in cutting-edge 1z nanometer DRAM chip production using ASML's extreme ultraviolet lithography (EUV) machines also likely lessened costs from the first quarter, analysts said.
Profits at Samsung's chip contract manufacturing and logic chip design businesses were likely to have improved too as operations at a storm-hit factory in Texas returned to normal, analysts said.
"One of the most-anticipated elements in the earnings call later this month is how much the chip contract manufacturing business has progressed in competitiveness, and the current status of foundry customers and orders," said Lee Won-sik, analyst at Korea Investment & Securities.
"Another is what changes Samsung expects in memory chip profitability, as competitors like Micron are said to be narrowing the technology gap (with Samsung)," Lee added.
Last month, US memory chip rival Micron Technology Inc reported a quarterly profit that beat Wall Street estimates, and forecast current-quarter revenue above expectations.
