Samsung Electronics: record sales, boosted by demand for chips and smartphones

Net profit of the world’s largest smartphone maker, Samsung Electronics, hit 11.32 trillion won ($8.9 billion) in the January-March period, the group said in a regulatory announcement on Thursday (April 28th). i.e. a link of 58.57% of its net profit in the first quarter of 2022 over one year. The technology sector is suffering from a shortage of components used in the manufacture of chips, linked to the boom in global demand for electronic products and difficulties in the supply chains produced by the coronavirus pandemic. But analysts said the backdrop benefited the world’s biggest chipmaker.

Their prices soared last year amid strong demand for chips used in consumer devices and data centers, helping the South Korean giant achieve record annual sales. Samsung’s performance “continues to be driven by the semiconductor segment, supported by demand for memory chips – DRAM and NAND – from data centers”, commented for AFP the vice-president of the company. ‘ Moody’s rating agency, Gloria Tsue. She added that disruptions at a competing factory of NAND Flash memory chips (used in particular in smartphones, USB keys, industrial and medical equipment, editor’s note) belonging to the American company Western Digital and the Japanese company Kioxia, had benefited to Samsung “due to reduced supply in the market”.

A new factory operational in 2024

Samsung Electronics’ operating profit jumped 50.5 percent to 14.12 trillion won, while revenue rose 18.95 percent to 77.78 trillion won. Samsung Electronics confirmed that it “reported record consolidated revenue for the third consecutive quarter”. The group’s shares were down 0.77% on Thursday when the Seoul Stock Exchange opened.

Samsung has markedly increased its investments in the semiconductor industry, where the worldwide shortage affects many sectors such as the automobile, household equipment, mobile telephony and video game consoles. In November, he announced plans to build a $17 billion microchip production line in Taylor, Texas. The new factory should be operational by the end of 2024. The giant is also working to develop in advanced technologies such as artificial intelligence, robotics and 5G/6G communications.

60% increase in sales for its mobile branch

Samsung Electronics said its memory business “reached record quarterly server sales amid strong demand.” In the mobile branch, the new flagship model, the Galaxy S22, saw a 60% increase in sales compared to the S21, during its first three weeks of launch in the United States, according to Counterpoint research. “The strong sales of the Galaxy S22 series since its launch in the first quarter have driven revenue growth, with the Galaxy S22 Ultra with S-Pen receiving positive feedback from current Galaxy Note customers,” Samsung said in a statement.

In addition, half of the Galaxy S22s sold in the first quarter were S22 Ultra, the flagship product released after the discontinuation of the Galaxy Note, Sujeong Lim, a researcher at Counterpoint, told AFP. “The Galaxy Note is a series of models that customers are most loyal to, and the S22 Ultra has been able to meet the expectation demand of these customers,” Lim said. “The price freeze, the Covid recovery and the fact that this is the first Galaxy smartphone equipped with a 4nm processor have won over customers”.

Samsung’s good performance linked to external factors

However, the company faces many challenges, analysts said. The “good performance of Samsung’s semiconductors is largely the consequence of external factors” such as the pandemic, Lim told AFP. “Given inflation, rising interest rates, and changes in post-Covid consumer habits, it’s hard to bet DRAM demand growth will continue into next year.”

“But despite other major risks in the macro environment – Russia’s invasion of Ukraine and Shanghai’s Covid-19 lockdown – Ms. Tsuen showed her credit profile should ‘remain very strong. “. Samsung Electronics is the flagship subsidiary of the giant Samsung Group, by far the largest of the family empires, known as the chaebols, which dominates business in South Korea. The conglomerate’s revenue is around one-fifth of South Korea’s Gross Domestic Product.

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