As shortages will continue, Samsung is optimistic about chip demand
Samsung Electronics Co., Ltd. update
Sign up for myFT Daily Digest and be the first to learn about Samsung Electronics Co., Ltd. news.
Samsung Electronics said it is optimistic about the prospects of its key semiconductor business in the second half of the year, but warned that due to the comeback of Covid-19, supply chain risks are increasing.
The forecast was made after the South Korean technology group announced that its net profit in the second quarter increased by 73% year-on-year to 96 trillion won ($8.4 billion), as the strong demand for electronic products has prolonged the global chip shortage.
The company said on Thursday: “In the second half of the year, market conditions are expected to benefit the parts business.” “However, the risk of continued interruption of component supply and the uncertainty associated with Covid-19 may persist.”
The world’s largest manufacturer of memory chips, smart phones and electronic displays reported that all of its major businesses have experienced substantial year-on-year growth. But it faces growing supply chain risks in Vietnam-Vietnam is an important production base for smartphones and home appliances.
Earlier this month, Samsung was forced to cut production at a consumer electronics factory in Ho Chi Minh City, while production of its smartphones was also interrupted.
As data center operators and PC manufacturers are eager to secure inventory, the operating profit of their semiconductor business increased by 28% year-on-year to 690 million won, accounting for more than half of the company’s total profit. The company said its memory chip inventory has fallen to a “significantly low level.”
Analysts expect the chip shortage will continue in the second half of the year, but believe that the industry has passed the most serious crisis. CW Chung, head of research at Nomura in Seoul, said: “As the memory boom continues, Samsung’s third-quarter revenue will further increase.” “Chip prices will continue to rise in the second half of the year, but the rate of increase may slow.”
For decades, Samsung has dominated the production of Dram and Nand chips. SK Securities analyst Kim Young-woo predicts that Dram prices will rise by 12-15% in the second half of the year, while Nand prices are expected to rise by 7-11%. Dram supports short-term storage of graphics, mobile and server chips, while Nand allows files and data to be stored in the event of a power failure.
However, due to chip shortages and supply chain disruptions, Samsung’s smartphone sales fell by 24% from the previous quarter. Samsung’s rival Apple reported that as the American company got rid of its worst chip shortage, iPhone sales in the April-June quarter soared by 50%.
However, Samsung expects mobile phone sales to increase in the second half of the year because it plans to launch a new foldable phone next month. The company also expects that its mobile display business will increase revenue in the second half of the year as major customers including Apple launch new flagship models.