Samsung Elec sees component shortages persisting in H2, solid server chip demand

Samsung Electronics Co Ltd reported a 51% rise in quarterly profit on Thursday, buoyed by robust data centre demand for high-margin memory chips, but cautioned that component shortages will likely continue in the second half.

The world`s top memory chip and smartphone maker said demand for server chips is expected to be relatively solid in the second half, but the pace at which component shortages are resolved will need constant monitoring.

While uncertainties related to the macroeconomic environment and geopolitical issues are likely to persist, the company will prioritize increasing the portion of advanced processes for components," it said in a statement.

Samsung`s operating profit rose to 14.1 trillion won ($11.1 billion) for the quarter ended March 31, from 9.38 trillion won a year earlier.

That was its highest first-quarter profit since 2018, and in line with the company`s estimate earlier this month.

Profits at its chip business rose to 8.45 trillion won, more than double the 3.36 trillion won a year earlier, fueled by record sales of server chips in the quarter.

Memory chip rival SK Hynix on Wednesday forecast solid demand for server chips but warned that sales to smartphone and personal computer customers was softening due to COVID-19 led lockdowns in China.

In Samsung`s non-memory chip business, the rising price of older chip models as well as improving yields at its chip contract manufacturing business lifted its earnings compared with the previous quarter, analysts said.

Operating profit at Samsung`s mobile and network business came in at 3.8 trillion won in the first quarter, slipping from 4.4 trillion won a year earlier.

Samsung ramped up production of its mid-to-low-end Galaxy A series in the quarter to compete aggressively in the segment, while launching its flagship Galaxy S22 series. It raised its smartphone market share to 24% during the period from 22% a year earlier, said Canalys analyst Sanyam Chaurasia.

Overall revenue rose 19% to a record 77.8 trillion won.

The company said it expects chip demand from server clients to remain relatively solid in the second quarter, and the smartphone market is projected to continue to grow in the second half of the year.

However, component shortages and lack of capacity availability at its chip contract manufacturing facilities are also expected to continue.

Analysts said Samsung`s recent focus on selling more high-margin memory products to prioritise profitability over volume would ultimately limit shipments and help boost DRAM prices later in the year, as would the limited increases in chip production capacity due to delivery delays in chipmaking gear.

Samsung shares traded down 0.6% in early trade on Thursday, compared with a flat wider market.