Samsung Electronics Co.’s profit for the first quarter beat analyst estimates thanks to strong demand for mobile devices and other technology during the pandemic.
South Korea’s largest company reported net income of 7.1 trillion won ($6.4 billion) for the three months ended March, beating the 6.7 trillion won average of estimates compiled by Bloomberg. Samsung disclosed preliminary numbers earlier this month that showed operating profit rose by 44% off 65 trillion won in sales.
The Suwon-based conglomerate has been riding a boom of stay-at-home demand for PCs, home appliances and cloud services, but semiconductor supplies have been stretched globally. Just before the company reported results, major automakers Ford Motor Co. and BMW AG warned of deeper-than-expected hits to production because of chip shortages.
Samsung’s shares stood mostly unchanged in early Thursday trading in Seoul.
Samsung said it will step up production to address the shortages and forecast that chip earnings will increase in the second quarter. It said a factory in Austin, Texas, that had been knocked offline has resumed normal operations. Still, it warned about uncertainty surrounding strained semiconductor supplies worldwide and stressed it would focus on shoring up its logic chip business.
“As for the second half, amid the possibility that the current supply shortages will persist, the company will maximize its capability to supply chips by strengthening cooperation with the in-house foundry and expanding use of outsourced foundries,” the Korean company said in a statement.
Profit declined at Samsung’s giant memory chip division, which provides key components for smartphones and servers, after the Texas outage. But Samsung said it expects demand to rev up this quarter thanks to new 5G mobile models, server and storage demand, and a rebound in economic activity, propelling a significant improvement in the unit’s earnings.
Still, the chip crunch shows signs of disrupting its own devices arm. Samsung warned that both revenue and profit at its mobile division, which produces its flagship Galaxy smartphone line, will slide this quarter because of component shortages and weak demand for flagship models.
Samsung had previously warned of a serious imbalance in the chips market, while rival Taiwan Semiconductor Manufacturing Co. said this month that shortages could extend into next year. The Korean company is currently evaluating U.S. sites for an advanced $17 billion plant it hopes will propel its ambitions of competing with TSMC in the pivotal market for made-to-order chips.
“Although there are concerns that a setback in mobile production following the components shortage may bring a negative effect to memory demand, the chip business sentiment is still very solid,” said Song Myung-sup, analyst at HI Investment & Securities.
Shares in Samsung, one of the biggest beneficiaries of last year’s surge in online and mobile activity, have almost doubled from a March 2020 trough.
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April 29, 2021 at 06:47AM
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Samsung Profit Tops Estimates as Gadget Sales Surge - Bloomberg
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