South Korea's Samsung Electronics is poised to record its biggest fourth-quarter financial results, based on preliminary earnings guidance it provided on Friday, owing to strong demand for server memory chips.
The world's biggest mobile phone manufacturer is forecasting sales of 75-77 trillion Korean won ($62.4-$64 billion), about 25 per cent more than in the same period a year earlier, it said in a statement on Friday. The company is forecasting that operating profit surged more than 52 per cent to 3.7-13.9tn won ($11.4-$11.6bn) from the same period in 2020.
South Korean disclosure regulations “do not allow earnings estimates to be offered as a range”, the company said. “To comply with such regulations, the figures represent the median of the estimate ranges provided".
Samsung, the maker of the Apple iPhone's rival Galaxy series, did not provide a breakdown of its divisional earnings. The company will report its full fourth-quarter results on January 27.
Samsung's best three-month period ever was its fiscal 2021 third quarter, in which it reported sales of almost 74tn won and operating profit of 15.82tn won. The performance was fuelled by chips, OLED panels and its new-generation foldable smartphones.
During that quarter, its semiconductor business was an anchor, posting 26.41tn won in consolidated revenue and 10.06tn won in operating profit, or about 35 per cent and 64 per cent, respectively, of the overall figures.
Samsung had previously warned challenges remain.
“In 2022, amid expectations of a recovery in global IT demand, the company’s component business will focus on expanding advanced processes and enhancing product and technology leadership. In smartphones and consumer electronics, the company will prioritise solid profitability by strengthening the premium category leadership. However, uncertainties related to component supply disruptions and Covid-19 are likely to remain,” it said.
In November, Apple supplier Foxconn similarly said that the global chip shortage would run into the second half of 2022.
The global semiconductor industry, which was plagued by supply challenges in 2021 owing to the Covid-19 pandemic, is poised for a big rebound this year, with sales expected to cross $600bn for the first time driven by “unusually strong” demand for consumer electronics, Allianz subsidiary Euler Hermes said in a report this week.
Worldwide chip sales surged 26 per cent to hit an all-time high of $553bn in 2021, making the wider electronic component industry one of the winners from the pandemic, it added.
GlobalFoundries, the world's third-largest semiconductor manufacturer owned by Abu Dhabi's Mubadala Investment Company, capitalised on the market conditions and listed on New York's Nasdaq in October, raising $2.6bn.
Samsung's role as both a major electronics manufacturer and a component supplier to the Big Tech companies, including the likes of Apple and Japan's Sony, make it one of the key players in the semiconductor industry.
It is the third-largest chip manufacturer by market capitalisation with about $436bn, bigger than Intel, Qualcomm and Advanced Micro Devices, and trailing only Taiwan Semiconductor Manufacturing Company and California-based Nvidia, according to CompaniesMarketCap.
Component shortages may start to “somewhat ease” in the second half of 2022, the executive vice president of Samsung’s memory business, Han Jin-man, said in the company's 2021 third-quarter earnings call.
Last month, Gartner said that the semiconductor crisis will drive nearly 50 per cent of the top 10 car makers to design and produce their own chips by 2025.
Last November, Samsung announced plans to build a $17bn semiconductor factory outside of Austin, Texas. It said it will start building the Texas plant this year and aims to begin operations in the second half of 2024.
In August, Samsung unveiled two new 5G-enabled foldable smartphones, the Galaxy Z Fold3 and Galaxy Z Flip3, the latter of which was its first model that costs less than $1,000. The company aims to make foldable technology more popular and attract more customers.
At the continuing Consumer Electronics Show in Las Vegas, Samsung announced its plans for “everyday sustainability”, adopting new, low-impact product manufacturing practices, footprint-reducing packaging, a more sustainable customer experience and the disposal of products at the end of their life cycles.