Samsung Electronics forecast its strongest first profit in four years Thursday as surging chip demand offset uncertainties in the global smartphone market.
Samsung, which provides preliminary results a few weeks prior to its full earnings report, said operating profits would likely rise 50% from last year to around $11.6 billion, topping the Street consensus forecast but the highest since 2018. Group revenues, Samsung said, will likely rise 18% from last year to a record $63.35 billion.
Chip sales are likely to have driven the bulk of Samsung's profits, with memory pricing and robust data-center demand driving margin improvements.
Smartphone sales, however, remain clouded in uncertainty after reports suggesting Apple (AAPL) - Get Free Report is planning to cut some of its iPhone production rates amid waning demand and chip supply disruptions.
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Last month the world's biggest electronics manufacturer, Taiwan-based Foxconn, cautioned it may not have certainty on supply chain disruptions until later in the year.
Foxconn said that while it was "cautiously positive" on sales for the coming year, it expected flat revenues from its smartphone segment owing to supply chain uncertainty and the impact of Covid infections and shutdowns in the Asia region.
Despite recent concerns about the macro environment, we assume positive sentiment in the memory market. In 2Q22, we expect additional earnings improvement along with an increase in memory shipments and a more favourable pricing environment," said Daiwa Capital Markets analyst SK Kim . However, for mobile, considering the on-going geopolitical risk and AP supply issue, we see downside risk in smartphone shipments in 2022."
Samsung shares closed 0.7% lower in Thursday trading in Seoul at 68,000 Korean won each, a move that extends the stock's year-to-date decline to around 13.15%.