Samsung’s first-quarter profit exceeded analyst expectations due to the strong demand for mobile devices and other technologies during the epidemic. Samsung achieved a net profit of 7.1 trillion won (US$6.4 billion) in the first fiscal quarter ending in March, exceeding the market average of 6.7 trillion won. Preliminary data disclosed by Samsung earlier this month showed that the company’s operating profit for the quarter increased by 44% and revenue reached 65 trillion won.
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The stay-at-home order during the epidemic has increased the demand for PCs, home appliances and cloud computing services, benefiting Samsung. But at the same time, semiconductor supplies are tight on a global scale. As the company released its results, large automakers such as Ford and BMW suffered more severe production shocks than expected due to chip shortages. Samsung’s share price was almost unchanged in early trading on the Seoul stock market on Thursday.
Samsung said that the company will increase production capacity to solve the shortage of chips, and expects the profit of the chip business to increase in the second quarter. Samsung said the Austin, Texas plant, which had been forced to shut down before, has resumed normal operations. But they also warned of the uncertainty caused by the tight global semiconductor supply and emphasized the need to concentrate on the development of the logic chip business.
“Referring to the second half of the year, as the current chip shortage may continue, the company will expand chip supply capabilities as much as possible, strengthen cooperation with internal chip factories, and use more outsourced chip factories,” Samsung said in a statement.
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Affected by the power outage in Texas, the profit of Samsung’s memory chip division has declined. This business provides key components for smartphones and servers. However, Samsung expects that thanks to the increase in demand for new 5G mobile phones, servers and storage, coupled with the gradual recovery of the economy, demand for memory chips will increase this quarter, driving the profit growth of the division.
However, the chip shortage also has a negative impact on Samsung’s own equipment. The company warned that due to chip shortages and weak demand for flagship models, its mobile division’s revenue and profits will decline in the second quarter.
Samsung also warned before that the chip market will encounter serious imbalances. The company’s rival TSMC also said this month that the chip shortage will continue into next year. Samsung is currently selecting a site for a US$17 billion factory in the United States and hopes to compete with TSMC in the custom chip market.
Investment bank HI Investment&Securities analyst Song Myung-sup said: “Although there are concerns that the setbacks in mobile device production caused by the shortage of parts and components may have a negative impact on the demand for memory chips, Samsung’s expectations for the chip business remain firm.”
Affected by the epidemic, Internet and mobile device activities increased significantly last year. Samsung has also become one of the main beneficiaries, pushing the company’s share price to almost double its March 2020 low.
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