Samsung Electronics Co. Ltd said weakness in the global smartphone market would slow earnings growth, as it reported record quarterly profit yesterday thanks to strong demand for semiconductors used in servers.
The world’s biggest maker of memory chips, smartphones and television sets also flagged softer demand for smartphone Oled panels as a challenge for the second quarter, while its cash-cow chip business should remain strong.
Samsung Electronics shares were up 2.7 per cent as of 0412 GMT, while the KOSPI benchmark share price index was 1.3 per cent higher, as investors shrugged off concerns about the smartphone market and seized on the outlook for memory chips.
Investors shrugged off concerns about the smartphone market
“Shares are rising as Samsung Electronics’ outlook for its memory chip business appears more positive than we’ve heard from other companies,” said Greg Roh, analyst at HMC Investment & Securities.
South Korean rival SK Hynix Inc. and Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) separately warned this month of slower growth in smartphone chip sales. TSMC, a key supplier for Apple Inc’s iPhones, cut its revenue target last week.
But Samsung Electronics, a rival and supplier to Apple, forecast continuing strong sales not only of server chips but mobile chips as well.
Sewon Chun, senior vice-president at Samsung’s memory business, said the trend towards “high-density” chips with more processing power and bigger storage capacity would underpin demand for mobile Dram and Nand chips this year. This was being driven by new applications such as high-performance gaming, he told an earnings call.
Samsung Electronics said operating profit was 15.6 trillion won (£10.33 billion) in the first quarter, up 58 per cent from a year ago and in line with the 15.6 trillion won the company had estimated. Revenue jumped 19.8 per cent to 60.6 trillion won, also in line with its estimate.
The chip business was Samsung’s top earner again as it booked a record 11.6 trillion won operating profit in January-March, from 10.9 trillion won in the previous quarter, despite signs the recent boom in memory chips was tapering off.
Samsung hinted at further potential upside after the US banned US firms from doing business with Chinese mobile phone and telecommunications equipment maker ZTE Corp.
ZTE would be forced to look elsewhere for mobile chips if top supplier Qualcomm Inc. is locked out by the US ban.
Ben Hur, vice-president of Samsung’s System LSI business, which competes with Qualcomm, said Samsung would “actively respond” to new clients when he was asked by analysts if the ban would help Samsung’s chip sales in China.
Samsung said its mobile business booked 3.8 trillion won in quarterly profit, up 82 per cent from a year ago. Its flagship Galaxy S9 smartphone hit the market in mid-March.