Samsung projects a quarterly profit to reach a maximum of three years on the chip rise

Samsung Electronics estimated its second-quarter operating profit rose 53% to its highest level in three years as chip prices rose as demand for electronics prolonged global semiconductor shortages.

The world’s largest producer of memory chips, smartphones and electronic screens projected on Wednesday that operating profits reached $ 12.5 million ($ 11 billion) between April and June, compared to $ 8,000. million dollars the previous year. Analysts surveyed by Refinitiv had predicted that operating profits would increase to Won11.3tn. Samsung sales are estimated to have grown 18.9% to Won63tn.

Strong gains highlighted the growing demand for chips, which has depleted inventories and caused supply shortages in all industries, from cars to consumer electronics. Analysts expected chip prices to rise keep going up in the second part with a tight supply.

“Earnings are likely to rise further in the third quarter when both Dram and Nand prices are likely to rise by more than 10%,” said CW Chung, head of research at Nomura in Seoul. “The industry has just entered a supercycle that is likely to continue throughout the coming year.”

Samsung for decades dominated production of Dram and Nand tokens. The former allows for short-term storage for graphics, mobile, and server chips, while the latter allows for energy-free storage of files and data.

Prices for Dram tokens rose 27% in the second quarter from the previous three-month period, while those for Nand tokens gained 8.6%, according to research provider TrendForce.

“The Dram rise cycle is likely to continue, as Samsung is unlikely to sharply increase chip supply in an extremely low Dram inventory,” Suung Seung-youn, an analyst at Heungkuk Securities, said in a recent report.

Samsung’s profits in its foundry business also improved as operations at its Austin, Texas plant returned to normal. snowstorm-induced suspensions in February. The South Korean company plans to invest $ 17 billion in a new US plant for contract chip manufacturing.

Robust chip sales helped offset lower smartphone shipments as demand slowed due to Samsung’s latest flagship model launched in mid-January. According to Shinyoung Investment & Securities, the company shipped about 59 million smartphones in the second quarter compared to 76 million in the first quarter.

Analysts said Samsung’s mobile shipments were affected by falling demand from India and disrupting production at its Vietnamese plants as Covid-19 outbreaks spread to both countries. The shortage of chips too achieve the production of smartphones.

Samsung warned in April that smartphone manufacturing, televisions and appliances it had been disrupted by chip breakage and production was being “rebalanced” to minimize impact.

Shares of Samsung fell 1.1% on Wednesday morning, after gaining about 50% over the past year. The company will announce detailed second quarter results later this month.

The strong guidance came as controversy arose over whether Samsung’s leader Lee Jae-yong he should get out of jail. The billionaire heir to the group’s founding family is serving 18 months for bribery.

He will appear in court on Thursday for a separate hearing on alleged accounting fraud and price manipulation of the shares related to his succession. He also faces charges of illegal use of propofol, a medical drug.