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(Bloomberg) – Samsung Electronics Co.’s earnings missed analyst estimates and the company warned of weaker first-quarter results as competition from smartphones intensified and memory prices remained weak.
South Korea’s largest company reported net profit in the three months ended December of 6.45 trillion won ($ 5.84 billion), missing the 7.3 trillion won average of compiled estimates. by Bloomberg. Samsung also announced that it will increase its annual dividend payment to 9.8 trillion won and continue to return 50% of free cash flow to shareholders between 2021 and 2023.
Shares fell 2.8% in Seoul on Thursday before recovering.
Samsung’s semiconductor business profits were lower than estimated due to low memory chip prices, although the company said it expected a recovery in the first half of the year. In the smartphone business, the world’s largest handset maker struggled over the holiday season as Apple Inc. introduced its first 5G-capable iPhones and its Chinese rivals set fierce competition.
With a lot of good devices out there, “there’s only so much that Samsung can take away from it,” said Kiranjeet Kaur, research director at IDC.
Samsung will expand the capacity of its foundry business, which makes chips for customers like Nvidia Corp., to meet demand and overcome current supply shortages. It will also “actively” use resources to pursue strategic expansion of the facilities and “significant” acquisitions, the company said.
Preliminary figures released earlier this month showed that Samsung’s operating profit rose 26%.
A large gain and the costs associated with the new production lines weighed on Samsung’s semiconductor business, the company said. The semiconductor unit’s operating profit was 3.85 trillion won, below analysts’ estimate of $ 4.62 trillion. Headwinds on currencies and uncertainty around the spread of Covid-19 are expected to have a permanent negative impact, Samsung warned.
Read more: Samsung Reaches New Heights on Strong Memory Market Outlook
The demand for more powerful 5G smartphones as well as the build-up of server inventories are expected to lead to a long-awaited rebound in memory chip prices and “analysts are busy updating their memory price estimates,” said Yungsan Choi, analyst at Ebest Investment & Securities. Component supplier Murata Manufacturing Co. and chipmaker MediaTek Inc. both expect to ship more than half a billion 5G handsets this year.
Samsung’s business is showing signs of growth as its de facto leader, billionaire heir Jay Y. Lee, is back in jail after his bribery conviction. Its foundry business and billboard division both posted quarterly records. The company is forecasting “robust” smartphone sales, having launched its new family of Galaxy flagship phones earlier than usual this year.
The chipmakers Intel Corp. and Micron Technology Inc. gave a bullish forecast for the first quarter of this year on continued demand for computers and phones for working and studying from home. Taiwan Semiconductor Manufacturing Co. predicts another record year of investment with up to $ 28 billion set aside to expand and improve production capacity at a time of silicon supply shortages affecting everyone from automakers global to mobile tech giants like Apple Inc. and Qualcomm Inc.
Samsung’s contract chip manufacturing is expected to expand with the addition of Intel as a customer. The two companies have discussed the development and production of Intel’s motherboard chipsets over the past two years and Samsung will produce the chipset at its Austin, Texas plant starting this quarter, Meritz Securities said. in a note.
Samsung loaned to $ 10 billion Texas chip factory
The existing Austin plant is capable of operating a 14-nanometer process. With growing expectations for growth in the foundry market, Samsung plans to build a state-of-the-art logic chip manufacturing plant in the region that would be capable of manufacturing chips as advanced as 3nm in the future, Bloomberg News reported. earlier.
(Updates with details of the income appeal from the second paragraph)
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