Samsung Electronics Expects Operating Profit Rose 44% in First Quarter

By Timothy W. Martin in Seoul and Kwanwoo Jun in Singapore 

Samsung Electronics Co. said it expects a 44% increase in operating profit for the first quarter, topping expectations during a global shortage of semiconductors and despite shutdowns of some U.S. chip-making facilities.

The world's largest smartphone and memory-chip maker forecasts operating profit of 9.3 trillion South Korean won, equivalent to about $8.3 billion, during the first three months of the year. That compares with about 6.5 trillion won for the prior year's quarter.

The Suwon, South Korea-based firm estimates revenue of 65 trillion won, up 17% compared with the prior year.

Samsung's outlook topped the estimate of analysts, gathered by S&P Global Market Intelligence, of about 9.1 trillion won in operating profit and 61.4 trillion won in revenue.

The South Korean company is due to report full earnings later this month. Samsung is considered a bellwether for the tech world because it makes major electronics products and supplies competitors including Apple Inc. and Huawei Technologies Co., with components.

During the Covid-19 pandemic, Samsung and other semiconductor companies have benefited from a short-term boom in demand for memory chips from data centers stepping up capacity and consumers buying more devices to shift to working from home. Now many buyers, including auto makers, have encountered delays trying to purchase semiconductors as economies start to reopen.

The Biden administration is expected to later this month with chip makers and other manufacturers, with Samsung a likely participant, as U.S. officials explore ways to boost domestic production during a global shortage. As part of President Biden's $2.3 trillion infrastructure plan, roughly $50 billion will go toward the American semiconductor industry, offering production incentives and research and design, including the creation of a National Semiconductor Technology Center.

Samsung was forced to idle chip production in Austin, Texas, in February because of severe weather. Company officials recently said production had returned to near-normal levels. But industry analysts have said the weekslong shutdown could trigger losses of roughly $350 million or more.

Global chip makers have recently announced plans to increase production capacity, and Samsung plans to invest about $116 billion by 2030 to diversity and boost its semiconductor output. The South Korean company is also considering an investment of up to $17 billion to build a new chip-making factory in the U.S.

At its annual shareholder meeting last month, Koh Dong-jin, a co-chief executive officer of Samsung, told investors that a severe global shortage in semiconductors would hurt its business into the next quarter.

Sales of Samsung's latest flagship phone, the Galaxy S21, which launched in January, have been stronger than the prior year's version, according to industry analysts. Global smartphone sales are expected to rise this year after falling sharply during the pandemic, which closed many bricks-and-mortar stores and triggered layoffs.

The down year prompted another South Korean company, LG Electronics Inc. to pull out of the mobile-phone business by July 31, following years of losses. Samsung could be a beneficiary, especially in the U.S., where LG had been the third-largest vendor.

Write to Timothy W. Martin at [e-mail] and Kwanwoo Jun at [e-mail]

(END) Dow Jones Newswires

April 06, 2021 22:02 ET (02:02 GMT)

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