Despite the shortages of parts worldwide under the pandemic, South Korea’s No.1 conglomerate Samsung Electronics logged its largest-ever quarterly earnings in the third quarter of 2021, owing mainly to robust sales of chips and foldable smartphones.
According to the earnings announced on Thursday, the tech giant posted 73.98 trillion won ($63.15 billion) in sales and 15.82 trillion won in operating profit during the July-September period.
It is the first time that the world’s biggest memory and smartphone provider surpassed the 70 trillion won mark in quarterly sales.
The Q3 sales rose 16.2 percent from the previous quarter and 10.48 percent from a year earlier. The operating profit of 15.82 trillion won was the second largest after the third quarter of 2018 when the semiconductor market enjoyed a super-cycle.
With that, Samsung extended a streak of record-breaking earnings for three quarters in a row this year. It has become more likely that the tech titan sets a new annual record in 2021, with just one quarter remaining.
By business, the semiconductor division was the bellwether that accounted for 64 percent of Samsung’s total operating profit.
The chip unit recorded 26.41 trillion won in sales and 10.06 trillion won in operating profit.
DRAM sales marked the second quarterly highest and the largest shipments in Samsung’s history, the chipmaker said.
The company also mentioned its foundry business had contributed to the improved earnings as it increased production of customized chips for global customers.
The display subsidiary under the chip business reported 8.86 trillion won in sales and 1.49 trillion won in operating profit, owing to high sales of Samsung’s foldable smartphones.
The smartphone business raised 28.42 trillion won in sales and 3.36 trillion won in operating profit, mainly due to the successful launch of Galaxy Z Fold3 and Z Flip3 models.
The consumer electronics unit registered 14.1 trillion won in sales and 760 billion won in operating profit.
Despite the expansion of the Bespoke lineup, increased costs of raw materials and logistics caused the profitability to fall in the third quarter compared to the second quarter, the company said.
Samsung said it is difficult to provide specific guidance for next year, due to macroeconomic uncertainties such as the timing of mitigating component supply issues, influences of “Living with COVID-19” policies amid increasing vaccination rates, and raw material pricing issues.
However, demand for servers and PCs are expected to be robust with the trend toward high-capacity following the expanding new CPU adoption and continued growth of enterprise IT investments.
“Risks the from demand-side are likely to continue, but as IT companies continue increasing their investments, overall demand for memory products will be steady,” a Samsung official explained.
Some market observers think Samsung’s Q4 earnings may decrease as the COVID-19-driven pent-up demand for electronics like PCs and laptops would peak, leading to decreases in DRAM prices, the core indicator for estimating Samsung’s earnings.
“As customers have different views of the memory market, the difficulty level of price negotiations is increasing,” said Han Jin-man, executive vice president at Samsung during an earnings conference call.
The executive also described the uncertainty in the memory market next year looms “very large“ as the component shortage problem and its impact on production are prolonging for a longer period than expected.
Samsung also referred to its expansion plan for the foundry business.
“The company has increased foundry capacity by 1.8 times this year compared to 2017, and plans to triple by 2026,“ a foundry executive said.
For mobile, the company expects overall smartphone shipments to continue pivoting on the low- and mid-range 5G models as well as launches of new form factors.
“The company aims to reinforce its leadership in the premium segment by driving the mainstreaming of the foldable category providing innovative technology and differentiated experience such as Galaxy Z Flip3 Bespoke Edition,” an official from the mobile unit said. “With these efforts, the company will strive to achieve solid performance by strengthening mass-market 5G lineup and device ecosystem business.”
Samsung’s consumer electronics business expects higher demand for TVs in the fourth quarter due to the year-end seasonality.
However, year-on-year demand is expected to decrease as more regions adopt “Living with COVID-19” policies and pent-up demand effects continue to fade, the company noted.
“In 2022, the company expects the growth trend to continue to slow, as consumers increasingly spend less time at home,” an official from the consumer electronics business said. “However, a heightened interest in customized, premium lifestyle products is expected to remain, which the company plans to actively address. Further product mix enhancement, global market expansion, retail and marketing optimization, and strengthened supply chain management capabilities are key elements of Samsung’s plan.”
By Song Su-hyun (email@example.com