Samsung Electronics Expects 52% Rise in Quarterly Operating Profit

Samsung’s estimated fourth-quarter operating profit was below market expectations but the electronics giant said the drop reflected a one-time bonus paid to employees.

The Suwon, South Korea-based company estimates it generated 76 trillion in sales, roughly a 24% gain from a year ago and a quarterly revenue record for the company.

Samsung’s top-line boost reflects ongoing strength for chip makers that have enjoyed elevated demand during a long-lasting supply crunch. The company is considered a bellwether for the tech world as it is both a major electronics maker and components supplier to big tech firms including

Apple Inc.

and

Sony Group Corp.

Samsung and many other chip makers have seen their revenues jump, as a pandemic-fueled surge in demand for all sorts of devices requiring semiconductors has created widespread shortages and a run up in prices.

Analysts polled by S&P Global Market Intelligence on average expected the company to post about 15.2 trillion won in operating profit, and 75 trillion won in revenue. Samsung is due to report full earnings later this month.

Shares in Samsung rose 1.3% in early Friday trading in South Korea.

Prices of memory chips—both DRAM and NAND flash—were expected to drop in the final three months of last year, as the global semiconductor shortage stalls the assembly of various tech products requiring memory.

But profits held up, as the price decline was smaller than expected due to robust demand for server memory chips in particular, coupled with the gradual easing of the chip shortage, said CW Chung, head of Asia technology research at

Nomura Holdings Inc.

Fourth-quarter prices of DRAM are projected to have fallen by up to 8% from the prior quarter, while the same prices of NAND flash are expected to have decreased by up to 5%, according to TrendForce, a Taiwan-based market researcher.

Memory prices are expected to fall further in the first half of this year, though temporary production adjustments at Samsung’s memory manufacturing facilities in Xi’an, China, recently hit by Covid-19 lockdowns, may help temper the decline, according to analysts.

Samsung’s contract chip-manufacturing business is expected to see increased profits in the fourth quarter, as firms have been able to charge higher prices amid capacity shortfalls relative to demand, Mr. Chung said.

The chip manufacturing industry is now on a major investment spree to raise production capacity. Last year, Samsung Group said it would invest more than $205 billion over the next three years, with chip-making a priority. Samsung Electronics announced a $17 billion investment in Taylor, Texas, in November as it moves forward with ambitions to grow its chip prowess outside memory.

Intel Corp.

recently pledged to build new chip-making facilities in Europe valued at up to $95 billion, while

Taiwan Semiconductor Manufacturing Co.

has said it would spend a record $100 billion over the next three years to increase production capacity.

Meanwhile, Samsung’s smartphone business is expected to have logged a relatively solid quarter thanks in part to a strong pushout of its premium foldable phone lineup—the Galaxy Z Fold 3 and Galaxy Z Flip 3. Marketing costs, though, are expected to have weighed on profitability.

Last month, Samsung said world-wide sales of its foldable devices in 2021 was four times higher than the prior year’s record. It didn’t disclose the shipment volume.

However, component shortages are continuing to take a toll on the phone industry. Supply of chips such as application processors, power management chips and display drivers remain tight, capping shipments, said Tom Kang, a Seoul-based research director at Counterpoint Research.

“The component shortage is improving but supply still remains tight. Samsung could have done better in this quarter if the semiconductor shortage situation was relieved earlier,” Mr. Kang said.

Counterpoint estimates that Samsung shipped around 67 million phones in the fourth quarter, a roughly 7% increase from the same period in the prior year. But in pre-pandemic 2019, Samsung had shipped 70.4 million units in the fourth quarter.

Samsung recently revamped its leadership and realigned its core businesses, as it looks to bolster its leadership in semiconductors and revitalize its smartphones business.

Last month, the South Korean tech giant replaced all three of its co-CEOs and merged its mobile and consumer-electronics units into a single unit. The consolidation is expected to better position Samsung to work more easily across its product categories from mobile devices to other consumer electronics devices.

Write to Jiyoung Sohn at [email protected]

Corrections & Amplifications
Samsung Group said it would invest more than $205 billion over the next three years, with chip-making a priority. An earlier version of this article incorrectly said Samsung Electronics would invest more than $250 billion. (Corrected on Jan. 6.)