Samsung Electronics Co. Ltd. (005930.KS) announced Thursday that operating profit in the first quarter is estimated to have increased by 50%, the highest first-quarter profit since 2018, exceeding expectations as strong demand underpins the price of memory chips.
Analysts said the profits of Intel, the world's largest manufacturer of memory chips and smartphones, were also supported by active smartphone sales in the quarter and the shutdown of rival NAND Flash chip factories.
Samsung said in its preliminary earnings report that its profit for the first quarter was 14.1 trillion won ($11.6 billion), while the Refinitiv Smart Estimate was 13.3 trillion won. Revenue could rise 18 percent from the same period last year to a record 77 trillion won, also higher than market expectations.
Park Sung-soon, an analyst at Cape Investment & Securities, said: "The performance guidance exceeded market expectations, possibly because memory chip shipments and prices were better than expected."
While memory chip prices fell in the first quarter, analysts said strong demand from data center customers, as well as cautious investment spending by chipmakers, and limited capacity expansion, boosted Samsung's chip earnings. Chip profits account for about half of Samsung's total profits.
Japan's Kioxia and the U.S. Western Digital(WDC. O: Quotes) A NAND flash memory chip factory under its umbrella has stopped production due to contamination of raw materials, which may also benefit Intel.
"After Kioxia's pollution problem, I thought Samsung's order for NAND flash chips was meant to be protected from Kioxia," Park said.
Data provider Trend Force said the shutdown at the Kioxia plant in early February is expected to drive NAND flash prices up by 5 to 10 percent, offsetting the impact of buyers remaining moderately high in inventory.
According to the polyphonic study, Samsung's smartphone shipments in the first quarter were estimated at 72 million units, down about 11 percent from the same period last year, mainly because its latest flagship smartphone, the Galaxy S22, was released later than usual.
Associate Director Lin Soo-jeong said: "In the first week after the launch of the Galaxy S22 series at the end of February, the global sales volume was about 50% more than the previous S21."
Lin said shipments of Samsung's S22 series are expected to be slightly above 6 million units at the end of March, adding that sales were in line with initial expectations.
Samsung is scheduled to release a detailed earnings report on April 28, when investors will be interested in hearing any comments on its merger plans, how to operate the memory chip business to improve profitability, and the prospect of chip demand.
Samsung shares fell 0.2 percent in early trading, while broader shares fell 0.9 percent.