Samsung Elec sees component shortages persist in second half, solid demand for server chips By Reuters

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© Reuters. FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul, South Korea March 23, 2018. REUTERS/Kim Hong-Ji

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By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – Samsung Electronics (OTC:) Co Ltd said on Thursday it expects firm demand from data centers for high-margin memory chips to continue in the second half, but warned that Component shortages will likely persist as well.

The world’s largest memory chip and smartphone maker said underlying demand for server chips appears “relatively strong” as companies ramp up investment and look to new technologies to grow their business.

“Enterprises are now expanding their IT infrastructure, and cloud companies are increasing their investments to explore new growth areas such as artificial intelligence and machine learning,” said Han Jin-man, executive vice president of the Samsung (KS:) memory chip activity during a press conference. call.

“However, there are still issues with parts supply, which could lead to disruptions. We will be monitoring fluctuations in demand very closely and intend to provide a supply that matches demand,” he said. -he declares.

Samsung expects weaker demand for cellphones and personal computer chips in the second quarter as consumers grapple with issues such as rising inflation and COVID-19 lockdowns, but PC demand d The business is expected to remain strong, while more rollouts of 5G-enabled phones in the second half could increase mobile demand.

Memory chip rival SK Hynix offered a similar perspective on Wednesday.

Analysts said Samsung’s recent focus on selling more high-margin memory products to prioritize profitability over volume will ultimately limit shipments and help drive up DRAM prices down the road. in the year, as well as limited increases in chip production capacity due to delays in the delivery of chip manufacturing equipment.

In the contract chip manufacturing business that counts Qualcomm (NASDAQ:) and Nvidia (NASDAQ:) as customers, Samsung said its order book for the next five years is eight times its revenue of 2021.

It plans to win more high-profile chip-making customers in areas other than mobile phones, such as high-performance computing, networking equipment and the automotive industry.

Samsung forecasts continued growth in the smartphone market in the second half of the year despite component shortages, and expects the foldable phone market to double in size from a year earlier.

PROFIT JUMP

The South Korean giant confirmed a 51% rise in operating profit to 14.1 trillion won ($11.1 billion) for the quarter ended March 31, in line with its previous forecast. It was the company’s highest first-quarter profit since 2018.

Still, shares of Samsung traded down 0.6% on Thursday, against a 0.7% rise in the broader market, extending a 17% drop since the start of the year.

“Samsung’s share price is a market issue, rather than a company issue,” said Park Sung-soon, analyst at Cape Investment & Securities.

“In the past, when the memory chip industry was very cyclical, demand was very visible, so investment was attractively predictable. But now, there are all these macro issues and low visibility of the request.”

Profits from its chip business hit 8.45 trillion won, more than double the 3.36 trillion won a year earlier, fueled by record server chip sales in the quarter.

Profits from the mobile and network business were 3.8 trillion won in the first quarter, down 13% from a year ago. Sales were supported by ramping up production of the mid-to-low-end Galaxy A series and the launch of Samsung’s flagship Galaxy S22 series, said Canalys analyst Sanyam Chaurasia.

Overall revenue rose 19% to a record 77.8 trillion won.

($1 = 1,271.3900 won)

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