Samsung Electronics, the world's biggest mobile-phone manufacturer, reported a 53 per cent surge in fourth-quarter operating profit as record sales helped the company rebound despite supply-chain disruptions.
Operating profit in the three-month period to the end of December rose to 13.87 trillion won ($11.5 billion) from the year-earlier period, the company said in a statement on Thursday.
Quarterly revenue soared more than 24 per cent to a record 76.57tn won, from the same period in 2020 in line with expectations.
Growth in revenue was driven mainly by the finished product businesses, with a rise in sales of premium smartphones, including foldable phones, as well as TVs and home appliances, the company said.
Full-year operating profit jumped 43.4 per cent to 51.63tn won, while revenue rose 18 per cent to a record 279.6tn won, driven by the strength of its semiconductor business.
Despite strong earnings, the stock price of Seoul-based Samsung closed down 2.73 per cent on Thursday.
Sales and profitability in both the fourth quarter and the year were driven by Samsung's consumer electronics and components business.
The 8.84tn won operating profit from its semiconductor business accounts for about 64 per cent of its fourth-quarter results. The chips business posted a revenue of 26.01tn won.
For the full-year 2021, the unit contributed almost 57 per cent to the company's operating profit and over a third to revenue, according to consolidated figures from its website.
Samsung is the world’s third-largest chip manufacturer by its $400bn market capitalisation as of Thursday. That makes it bigger than Intel, Qualcomm and Advanced Micro Devices. It trails the Taiwan Semiconductor Manufacturing Company and California-based Nvidia, according to CompaniesMarketCap.
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 earlier this month.
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.
The company expects supply to remain tight in 2022, but will focus on improving its process yield to improve supply stability. It aims to exceed market growth by expanding capacity, adjusting prices and adding new customers. In November, it announced plans to build a $17bn semiconductor factory outside of Austin, Texas.
The fourth-quarter revenue growth was driven mainly by the finished product businesses, with expanded sales of premium smartphones, including foldable phones, as well as TVs and home appliances
Samsung Electronics
Samsung's mobile unit reported revenue of 28.95tn won and an operating profit of 2.66tn won in the fourth quarter. The segment remained the biggest in the overall business in 2021, contributing almost 40 per cent for the full year. However, the last time its profit topped the semiconductor unit was in the first-quarter of 2021, according to the company's financial reports.
Samsung has also consistently been at the top of the rankings of the smartphone market. iPhone-maker Apple, however, retook the top spot in the fourth quarter of 2021, with a market share of 22 per cent against Samsung's 20 per cent, according to preliminary data from research firm Canalys.
The company cautioned that uncertainties remain in 2022 owing to the prolonged effects of the Covid-19 pandemic and component shortages likely to persist. It also expects the smartphone market to grow and the wearable market likely to see a double-digit growth.
"The company will strive to achieve material growth in 2022 and continue its efforts to enhance profitability with an improved product mix and operational efficiency," it added.
Samsung’s results come in the run-up to the company's first major event for 2022, Galaxy Unpacked, which will be held on February 9, when it reveals its new Galaxy S22 line-up.
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
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Director: Christian Carion
Starring: James McAvoy, Claire Foy, Tom Cullen, Gary Lewis
Rating: 2/5
Opening Rugby Championship fixtures:Games can be watched on OSN Sports
Saturday: Australia v New Zealand, Sydney, 1pm (UAE)
Sunday: South Africa v Argentina, Port Elizabeth, 11pm (UAE)
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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First Person
Richard Flanagan
Chatto & Windus
Three trading apps to try
Sharad Nair recommends three investment apps for UAE residents:
- For beginners or people who want to start investing with limited capital, Mr Nair suggests eToro. “The low fees and low minimum balance requirements make the platform more accessible,” he says. “The user interface is straightforward to understand and operate, while its social element may help ease beginners into the idea of investing money by looking to a virtual community.”
- If you’re an experienced investor, and have $10,000 or more to invest, consider Saxo Bank. “Saxo Bank offers a more comprehensive trading platform with advanced features and insight for more experienced users. It offers a more personalised approach to opening and operating an account on their platform,” he says.
- Finally, StashAway could work for those who want a hands-off approach to their investing. “It removes one of the biggest challenges for novice traders: picking the securities in their portfolio,” Mr Nair says. “A goal-based approach or view towards investing can help motivate residents who may usually shy away from investment platforms.”
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Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
