Samsung Electronics projects record W63tr in Q2 sales

Samsung Electronics expects its quarterly sales to rise to a record-breaking 63 trillion won ($55.4 billion) during the three months ending June this year, an 18.94 percent jump on-year, according to the South Korean IT giant’s earnings guidance Wednesday.

The company projected 12.5 trillion won in operating profit, a whopping 53.37 percent spike in the same period, the best figure since the third quarter in 2018 when the firm enjoyed a global chip boom.

Compared to the first quarter, the revenue is estimated to be 2.3 trillion won lower, but operating profit will likely see a 9.3 trillion-won leap.

Samsung Electronics’ chip business, which showed a lower-than-expected performance in the first quarter, propelled the earnings surprise in the second quarter.

Though the earnings guidance didn’t reveal specific figures by business divisions, considering the surge in operating profit, Samsung Electronics is expected to have reaped 7 to 8 trillion won in the chip business alone.

That accounts for almost 60 percent of the company’s total operating profit in the second quarter and is more than double from 3.4 trillion won in the previous quarter.

Industry watchers say that this signals the second round of a global chip super cycle, previously witnessed between 2017 and 2018.

The demand for computer chips maintains strong buoyed by the non-face-to-face trend during the prolonged coronavirus outbreak and as cloud companies are boosting demand for servers for data centers.

According to market research firm TrendForce, the price of DRAM in April surged 26 percent from the previous month, the greatest price hike since the 2017 chip super cycle.

Heading into the second quarter, Samsung’s foundry plant in Austin, Texas, was struggling to cut losses from an extended shutdown of its foundry factory due to a winter storm. The company managed to normalize operations there in May.

Analysts predict that Samsung Electronics will continue the momentum in the third quarter, with revenue around 70 trillion won and operating profit between 13 trillion won and 15 trillion won. The full-year operating profit is projected to surpass 50 trillion won.

As vaccines raise hopes for a return to the pre-pandemic life, the demand for computers seems to be slowing down after its peak in the second quarter, but rising demand for servers in the data centers will propel the company’s performance in the coming quarters, the industry watchers say.

By releasing its Galaxy 21 series early, Samsung Electronics’ IT and mobile communications division logged 4.4 trillion won in operating profit in the first quarter.

But the division’s pace of growth is anticipated to have slowed down in the second quarter, as the spread of COVID-19 in India and China discouraged smartphone demand and caused complications in production, with some models even suffering from the supply shortage of application processors.

Analysts predict the division’s operating profit in the second quarter at between 2.8 trillion won and 3 trillion won, about 1 trillion won lower than the previous quarter.

Samsung Electronics’ display division is anticipated to have raked in 900 billion won to 1 trillion won in operating profit in the April-June period, as a price increase of LCD panels and a one-off compensation worth from Apple estimated at 500 billion won offset the impact of a drop in phone production.

Meanwhile, the operating profit of the consumer electronics division, despite robust sales of home appliances such as TVs and the high-end, design-centric Bespoke series, has likely failed to meet the first-quarter figure of 1.2 trillion won.

The sales of premium TVs such as the Neo QLED TV are anticipated to have fallen short of first-quarter sales and the increase of LCD panel price and marketing costs have undermined the division’s profitability.

As outdoor activities are increasing in regions where vaccination rate is high such as North American and Europe, the division’s performance is expected to falter in the second half of this year.

By Kim Byung-wook (kbw@heraldcorp.com)