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Samsung Forecasts Best Quarterly Profit In 3 Years On Chip Price Hikes, Smartphone Demand

Samsung Electronics forest its strongest quarterly profit in three years Friday thanks to price hikes linked to a global semiconductor shortage and solid demand for its new foldable smartphones.

Samsung Electronics forecast its strongest quarterly profit in three years Friday as the world's biggest chipmaker capitalized on price hikes linked to a global semiconductor shortage and solid demand for its new foldable smartphones. 

Samsung, which provides preliminary results a few weeks prior to its full earnings report, said operating profits would likely rise 28% from last year to around $13.3 billion, just shy of the Street consensus forecast but the highest since 2018. Group revenues, Samsung said, will likely come in at around $15.55 billion.

Smartphone sales have also impressed, with the new Galaxy Z Flip 3, the tech giant's foldable rival to Apple's  (AAPL) - Get Apple Inc. (AAPL) Report iPhone, recording the third-fastest sales pace on record last month. 

Analysts at BMO Capital markets are forecasting total handset shipments of 85 million units for the quarter, around 95% of which will be smartphones. Apple, by comparison, sold around 49.6 million iPhone units over its fiscal third quarter, which ended in June.

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"While we assume its component business drove solid earnings thanks to semiconductor price hikes and increased sales of OLED display for new iPhone models, we assume weaker earnings for its set-device division due to the supply-chain issue and increased cost burden in 3Q21," said Daiwa Capital Markets analyst SK Kim, who caries a 'buy' rating on the stock.

"We also assume its display business recorded a sharp increase in revenue and maintained high margins in 3Q21," Kim added. "However, due to the supply-chain issue and increased cost burden, we assume the IM/CE division recorded weaker earnings in 3Q21."

Samsung shares closed 0.14% lower in Friday trading in Seoul at 71,500 Korean won each, a move that extends the stock's year-to-date decline to around 11.7%.