Samsung Electronics Co reported a surge in first-quarter profit on strong sales of memory chips and premium smartphones, but cautioned of risks ahead from inflation and geopolitical uncertainty.
Net income increased more than 50 percent to 11.13 trillion won (US$8.8 billion) in the three months ended March. Analysts predicted 10.14 trillion won on average, estimates compiled by Bloomberg showed.
Still, Samsung repeatedly warned about the potential impact from the war in Ukraine, surging inflation and COVID-19 outbreaks that have led to lockdowns in China.
Photo: AFP
“It is an immense challenge to predict the duration or market ripple effects of various macro issues such as the Russian-Ukraine war and global inflation,” said Jinman Han, executive vice president for Samsung’s memorychip business.
The company, which declined to make a financial forecast for the year because of the many uncertainties, saw revenue last quarter rise to a record, boosted by soaring demand for semiconductors.
Samsung said its memory business exceeded its own guidance on bit growth, because of solid demand from servers and PCs. It is benefiting from device manufacturers adopting chips that have bigger storage and better performance.
Samsung said server demand is likely to remain strong, but short-term demand for mobile devices has suffered, because of lockdowns in major Chinese cities and rising commodity prices, in part because of the war in Ukraine.
“A surge in raw materials prices caused by the Russia-Ukraine war” is hitting the smartphone industry, Han said. “The consumer sentiment has potential to recover later in the quarter, with the launch of new form factor models, with people spending more time outside following gradual reopening in some countries, with the resumption of investment in 5G infrastructure.”
Samsung projected smartphone demand would rise in the second half of the year after a slight decline this quarter.
The firm said it benefited from the strength of the US dollar against the won, which outweighed weakness in some emerging currencies. That helped boost operating profit by about 300 billion won, it said.
It is also making an aggressive — and expensive — push into the foundry business, essentially manufacturing chips for companies like Apple and Google that have started designing their own silicon. It has set an aggressive goal to start producing 3-nanometer chips in the first half of this year, ahead of Taiwan Semiconductor Manufacturing Co’s (台積電) schedule.
Still, progress has come at a cost. Although its foundry sales are rising amid the global chip shortage, investors question Samsung’s capability to manufacture advanced nodes beyond 4 nanometers. Its foundry unit is grappling with slower-than-expected improvement in production yields at its advanced chipmaking process.
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