Samsung Electronics Co. said it expects a 44% increase in operating profit for the first quarter, beating expectations amid a global semiconductor shortage and despite closures of some chip manufacturing facilities in the United States. United States.
The world’s largest smartphone and memory chip maker forecasts operating profit of 9.3 trillion South Korean won, or about $ 8.3 billion, in the first three months of the year. This compares to around 6.5 trillion won for the quarter of the previous year.
The Suwon, South Korea-based company estimates revenue at 65 trillion won, up 17 percent from the previous year.
Samsung’s outlook exceeded analysts’ estimate, collected by S&P Global Market Intelligence, of around 9.1 trillion won in operating profit and 61.4 trillion won in revenue.
The South Korean company is expected to report full profits later this month. Samsung is considered a standard bearer in the tech world as it manufactures major electronics and supplies components to competitors such as Apple Inc. and Huawei Technologies Co.
During the Covid-19 pandemic, Samsung and other semiconductor companies have benefited from a short-term boom in demand for memory chips from data centers increasing their capacity and consumers purchasing more devices to switch to working from home. Today, many buyers, including automakers, have encountered delays in their attempt to purchase semiconductors as economies begin to reopen.
The Biden administration is expected later this month with chipmakers and other manufacturers, with Samsung a likely participant, as U.S. officials explore ways to boost domestic production in the event of a global shortage. Under President Biden’s $ 2.3 trillion infrastructure plan, approximately $ 50 billion will go to the U.S. semiconductor industry, providing incentives for production, research and design, including the establishment of a national semiconductor technology center.
Samsung was forced to halt chip production in Austin, Texas in February due to extreme weather conditions. Company officials recently said production had returned to near-normal levels. But industry analysts said the week-long shutdown could result in losses of around $ 350 million or more.
Global chipmakers recently announced plans to increase production capacity, and Samsung plans to invest around $ 116 billion by 2030 to diversify and increase its semiconductor production. The South Korean company is also planning to invest up to $ 17 billion to build a new chip manufacturing plant in the United States.
At its annual meeting of shareholders last month, Koh Dong-jin, co-CEO of Samsung, told investors that a severe global semiconductor shortage will hurt its business in the next quarter.
Sales of Samsung’s latest flagship phone, the Galaxy S21, which launched in January, were stronger than the previous year’s version, industry analysts said. Global smartphone sales are expected to increase this year after falling sharply during the pandemic, which closed many physical stores and triggered layoffs.
The declining year prompted another South Korean company, LG Electronics Inc., to pull out of the mobile phone business before July 31, after years of losses. Samsung could be a beneficiary, particularly in the United States, where LG was the third-largest supplier.