Samsung’s second-quarter profit likely to rise 53% on higher chip sales

Samsung Electronics, South Korea's largest company, said its second-quarter operating profit is expected to surge nearly 53 per cent from a year ago, beating analysts’ estimates, driven by a rise in the prices as well as demand for semiconductor chips globally.

The world's biggest smartphone and memory chip maker reported an operating income of 12.5 trillion Korean won ($11 billion) in the three months through to June 30, according to the company's preliminary results released on Wednesday. It exceeded the Refinitiv SmartEstimate of 11.3tn won. Second-quarter operating profit was up 34 per cent over the first quarter of the year.

Second-quarter sales jumped nearly 19 per cent on an annualised basis to 63tn won. However, it decreased by about 3.5 per cent from the previous quarter, which recorded sales worth 65.3tn won.

Samsung, which did not reveal its net income or details on the performance of its different divisions, benefitted from pent-up demand for products such as smartphones, TVs, laptops and other home appliances as remote working fuelled a greater need for more personal devices.

The company’s chip factory in Austin, Texas, which was shut for about a month due to a severe snowstorm that caused power and water outages in the US in February, returned to full operations in April.

The average selling price of chips increased between 3 per cent and 15 per cent globally in the second quarter of the year, according to industry analysts. Chips are expected to remain in short supply in the coming months as demand remains high.

Several manufacturers are dealing with a severe shortage in semiconductor chip supplies as demand for gadgets and consumer electronics picked up amid the coronavirus pandemic.

Global chip sales are forecast to rise 8.4 per cent this year from last year's total of $433bn, according to the Semiconductor Industry Association. This is up from 5.1 per cent growth in 2020.

Samsung’s smartphone shipments rose 38 per cent from a year ago in the first quarter to 76.6 million units, according to the US-based researcher and consultancy Gartner.

Industry experts said its smartphone shipments will decline more than 20 per cent in the April-June period due to a dip in demand in India and production disruptions in Vietnam because of the pandemic.

Samsung will release detailed earnings later this month.