The author is an analyst with NH Investment & Securities. He can be contacted at [email protected] – Ed.
In 1Q21, the improvement in SEC earnings was led by the IM and CE divisions. While the profits of the semi-icons fell due to the ineffective business strategy of the company, the CE division experienced strong profit dynamics thanks to efficient cost management and a well-tailored response to a demand. increased contactless.
Semicon division experiences slower profit improvement than its peers
We reiterate a buy rating for Samsung Electronics (SEC) and a TP of W110,000. Recently, the semi-icons division has seen its profits improve more slowly than its competitors. In 1Q21, the foundry division’s profits deteriorated due to a power outage at its Austin plant and low production yields for some products. SEC has also fallen behind its peers in developing new products such as 1anm DRAM and 176 3D NAND layers and missed the perfect time to invest in capacity expansion.
Within the IM and CE divisions, both sales volume and OPM improved through effective cost management and a well-tailored response to increased contactless demand. Having boosted the recent improvement in SEC earnings, CE business is expected to experience stronger momentum with the launch of low-end foldable smartphones and micro LED TVs.
Demand for PCs and Servers to Drive 2Q21 Profit Growth
In 2Q21, the SEC is expected to record sales of W61.9tn (-3% qq) and OP of W10.2tn (+ 9% qq), fueled by a sharp surge in memory prices led by PC and server DRAM. By division, the OP 2T21 of SEC is estimated at W5.7tn for the semicon (+ 69% qq), W0.3tn for the display (-17% qq), W3.2tn for IM (-28% qq) and W0.8tn for CE (-25% qq).
In 2Q21, ASP DRAM is expected to grow 13% qq, supported by higher server demand from the launch of Intel Ice Lake SP 10nm. Mobile demand, which has improved recently, is also expected to contribute to the rise in DRAM prices. Meanwhile, NAND prices are expected to rise for the first time in four quarters, supported by cautious capacity investments. Elsewhere, we believe the IM division will experience a decline in qq profits due to the reduced launch effects of the Galaxy S21.