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Samsung, Micron Shares Surge as DRAM Chip Rebound Set to Drive Profit Growth

A price rebound for DRAM chips, which power smartphones and laptops, should drive profits for the semiconductor sector this year as demand outstrips supply.

Samsung Electronics  (SSNLF)  shares hit an all-time high Friday, while Micron Technology  (MU) - Get Micron Technology Inc. Report is set to open at a 20-year peak, as the pair look to ride a rebound in semiconductor prices fueled by work-from-home shifts and renewed smartphone demand. 

Samsung, the world's biggest chipmaker, forecast solid fourth quarter profits in its traditional earnings pre-release Thursday and expects operating profits for the three months ending in December to rise 26% from last year to around 9 trillion Korean won ($8.25 billion). 

Revenues are likely to rise 2% and take its topline to 61 trillion Korean won. Both figures are largely in-line with Street forecasts, with Samsung set to publish its final quarterly profit report on January 28.

Daiwa Capital Markets analyst SK Kim said that an expected rebound in dynamic random-access memory, or DRAM, semiconductors prices, solid demand for OLED screens linked to Apple Inc.  (AAPL) - Get Apple Inc. Report iPhones and an early launch of its own Galaxy smartphone should drive earnings growth in the coming quarters.

Samsung shares surged 7.12% over the course of the trading day in Seoul to close at an all-time high of 88.80, extending their six-month gain to around 67%.

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Micron shares, meanwhile, are set to open at a 20-year high on the Nasdaq Friday after the chipmaker forecast stronger-than-expected current quarter revenues driven in part by the same rebound in DRAM demand that lifted Samsung.

Micron said after the close of trading Thursday that its fiscal first quarter revenues rose 12% to $5.77 billion, with non-GAAP earnings coming in at a Street-beating 78 cents per share.

The Boise, Idaho-based chipmaker said current quarter revenues should rise to $5.8 billion, with CEO Sanjay Mehrotra telling investors on a conference call late Thursday that DRAM industry supply will likely fall below demand over the whole of the current year. 

"Stronger-than-expected industry demand has reduced supplier DRAM inventories," Mehrotra said. "Low inventories, combined with disciplined industry CapEx in 2020 and the vaccine-driven recovery from the pandemic, should result in further tightening of the DRAM market through calendar 2021."

Citigroup analyst Christopher Dan, who lifted his rating on Micron to 'buy' from 'sell, while boosting his price target by $65 to $100 per share earlier this week, described the DRAM markets as having "largest supply/demand imbalance since 2017".,  

Micron shares were marked 53.7% higher in early trading Friday to change hands at $82.10 each, the highest since July 2000 and a move that extends their six-month gain to around 67.5%.