Chips give wings to Samsung’s revenue

The South Korean giant saw its first-quarter profit jump nearly 60%, driven by demand for components and smartphones.

Samsung Electronics announced Thursday that net profit in the first quarter of 2022 was up 58.57% year-over-year, thanks to strong demand for memory chips and continued smartphone sales.

Net profit for the world’s largest smartphone maker reached 11.32 trillion won ($8.9 billion) in the January-March period, the group said in a regulatory announcement.

The technology sector is facing a shortage of components used in chip manufacturing, due to the massive global demand for electronic products and supply chain problems caused by the coronavirus pandemic.

But analysts believe this context has benefited the largest chipmaker in the world.

Their prices soared last year amid strong demand for chips used in consumer equipment and data centers, enabling the South Korean giant to achieve record annual sales.

Investments in semiconductors

Samsung’s performance “continues to be driven by the semiconductor segment, supported by the demand for memory chips – DRAM and NAND – from data centers,” said Gloria Tsue, the vice president of rating agency Moody’s for AFP.

She added that failures at a competing factory of NAND flash memory chips (used notably in smartphones, USB keys, industrial and medical devices, editors’ note) of US company Western Digital and Japanese company Kioxia have benefited Samsung. “due to a reduced supply on the market”.

Samsung Electronics’ operating profit rose 50.5 percent to 14.12 trillion won, while sales rose 18.95 percent to 77.78 trillion won.

Samsung Electronics claimed “record consolidated sales for the third consecutive quarter”.

Samsung has significantly increased its investment in the semiconductor industry, where the global shortage is affecting many sectors such as the automotive, home appliances, 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 developing advanced technologies such as artificial intelligence, robotics and 5G/6G communications.

Success of the Galaxy S22

Samsung Electronics said its memory business “achieved record quarterly server revenue amid strong demand.”

In the mobile industry, the new flagship model, the Galaxy S22, saw a 60% increase in sales compared to the S21 in its first three weeks of launch in the United States, according to Counterpoint research.

“Strong sales of the Galaxy S22 series since its launch in the first quarter contributed to revenue growth as the Galaxy S22 Ultra with S-Pen received positive feedback from current Galaxy Note customers,” Samsung said in a statement.

More than half of the Galaxy S22s sold in the first quarter were S22 Ultra, the flagship product released after the Galaxy Note was discontinued, counterpoint researcher Sujeong Lim told AFP.

“The Galaxy Note is a line of models that customers are most loyal to, and the S22 Ultra has been able to meet the expectations of these customers,” said Lim.

“The price freeze, the Covid recovery and the fact that this is the first Galaxy smartphone equipped with a 4nm processor have convinced customers”.

New challenges

However, the company faces many challenges, analysts said.

The “good performance of Samsung’s semiconductors is largely due to external factors,” such as the pandemic, Lim told AFP.

“Given inflation, rising interest rates and changes in consumer habits after Covid, it is hard to bet that demand for DRAM will continue to grow next year.”

“But despite other major risks in the macro environment – ​​the Russian invasion of Ukraine and the Covid-19 lockdown in Shanghai – Ms Tsuen said her credit profile should remain “very strong”.

Samsung Electronics is the flagship of the giant Samsung Group, by far the largest of the family empires known as the chaebols that dominate business in South Korea.

The conglomerate’s revenue is equivalent to about one-fifth of South Korea’s gross domestic product.

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