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(Bloomberg) – Samsung Electronics Co. reported better-than-expected earnings as memory prices and shipments rose on strong server demand and the foundry business recovered from disruptions at its Austin facility.
South Korea’s largest conglomerate generated an operating profit of 12.5 trillion won ($ 11 billion) in the three months ended June, surpassing the estimated average of 11 trillion won. Sales were 63 trillion won according to preliminary results released on Wednesday. The company said the profits reflect a one-time gain related to its display business without further outperforming the division’s performance. It will show net income and final numbers when full results are released on July 29th.
The one-time gain is likely a payment from Apple Inc., according to IBK Securities analyst Kim Woon-ho. “Total iPhone sales did not meet contract requirements for OLED panels, in part because iPhone mini sales were lower than expected,” he said. “Typically the reimbursement is around 1 trillion won.”
Samsung shares lost up to 1% in Seoul on Wednesday, with investors looking past today’s numbers and anticipating the next downturn for the memory market. The company’s mobile phone sales during the period may also have been disappointed after the supply chain in Vietnam was disrupted and its flagship models launched earlier than usual in January. The next-generation Galaxy Fold 3 and Galaxy Flip 3 are expected to hit the market in early August.
“The smartphone business has been hit by the impact of Covid-19 on demand in India and production disruptions in Vietnam, as well as a processor shortage on some models,” said Lee Seung-woo, an analyst at Eugene Investment & Securities. “We assume that smartphone shipments in the second quarter fell from 76 million in the first quarter to 59 million units.”
The company has benefited from an increase in online activity, which has increased demand for its memory chips for personal electronics such as personal computers and smartphones. Data center customers have also placed orders to expand their capacity and protect themselves from widespread chip shortages. The plant in Austin, Texas, which is responsible for the production of chips for external customers, is fully functional again after a power failure.
The story goes on
According to a release from IBK Securities, the average sales price of DRAM modules rose 15% in the second quarter, while that of NAND memory rose 3%.
Samsung is preparing for a major technology transition to its next generation of memory chips in the second half of this year. The world’s largest memory chip manufacturer announced in March that its DDR5 memory modules (Double Data Rate 5) will be twice as fast as the current DDR4 while improving energy efficiency – although they will also cost significantly more and will initially be available in limited quantities.
Read more: Samsung Reveals Next Generation Storage for Data Hungry AI and Computers
The company’s shares were roughly flat in the first half of this year, trailing the broader KOSPI benchmark, which is up around 15%.
“We anticipate Samsung’s memory business will benefit from the strength in memory prices in 2021 and forecast that foundry profits will recover from the impact of the Austin shutdown in the second quarter,” said Citigroup analyst Peter Lee in a message. “In addition, we expect Samsung to maintain its leadership position in semiconductor products / technology with 3D architecture and DDR5 in 2022 and maintain its market-leading position.”
(Updates with analyst comment and share price from the third paragraph)
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