Samsung predicts net profit after 5G iPhone debut

(Bloomberg) – Samsung Electronics Company’s profits missed analyst estimates and the company warned of weak first quarter results as smartphone competition intensified and memory prices remained weak.

South Korea’s largest company reported net income of $ 6.45 trillion ($ 5.84 billion) in the three months to the end of December, averaging 7.3 trillion won, estimates compiled by Bloomberg. Samsung also announced that it would increase its annual dividend payment to 9.8 trillion and continue to return 50% of the free cash flow to shareholders between 2021 and 2023.

Seoul declined 2.8% on Thursday before the recovery in shares.

Profit from Samsung’s semiconductor business fell short of estimates due to lower memory chip prices, although the company said it expects a recovery in the first half. In the smartphone business, the world’s largest handset manufacturer struggled over the holiday period as Apple Inc. Introduced fierce competition from its first 5G-capable iPhones and Chinese rivals.

“With so many good devices in the market,” said Kirnjit Kaur, research manager at IDC, “there’s only so much Samsung can get out of it.”

Samsung will expand the capacity of its foundry business, producing chips for customers such as Nvidia Corp to meet demand and overcome current supply shortages. It will also “actively” use resources for further strategic facility expansion and “meaningful” acquisitions, the company said.

The initial number released earlier this month saw a 26% increase in Samsung’s operating profit.

A strong win and the costs associated with new production lines weighed on Samsung’s semiconductor business, the company said. Operating profit for the semiconductor unit was 3.85 trillion won, lower than the 4.62 trillion estimate from analysts. Uncertainty surrounding currency headwinds and the spread of the Kovid-19 is likely to have a negative impact, Samsung warned.

Read more: Samsung’s new high on Strong Memory Market Outlook

Abest Investment and Securities analyst Yungsan Choi said demand for more powerful 5G smartphones with server inventory buildup is expected to cause a long-awaited rebound in memory chip prices and “analysts are raising their memory price projections Busy. ” Component supplier Murata Manufacturing Company and chipmaker MediaTek Inc. Both are projected to ship more than half a billion 5G handsets this year.

Samsung’s business is showing signs of growth at a time when its de facto leader, billionaire heir Jay Wai Lee, is back in jail after his conviction on bribery charges. Its foundry business and display panel division both recorded quarterly records. The company anticipates “strong” sales of the smartphone, which launched its new Galaxy flagship handset earlier this year.

Chipmakers Intel Corp. and Micron Technology Inc. made a strong forecast in the first quarter of this year for continued demand for computers and phones that enable working and studying from home. The Taiwan semiconductor manufacturing company is planning another record-breaking year of investment, with a $ 28 billion set aside, ranging from global automakers to mobile tech giants such as Apple Inc. in times of silicon supply shortages. Qualcomm Inc.

Samsung’s contract chip manufacturing is expected to expand with Intel as a customer. The two companies have discussed the development and production of Intel’s mainboard chipsets over the past two years and Samsung will produce the chipset at its Austin, Texas plant, starting this quarter, Merritt Securities said in a note.

Samsung asks for $ 10 billion Texas chipmaking plant

The current Austin fab is capable of operating on a 14-nanometer process. Bloomberg News said that with growing expectations of growth in the foundry market, Samsung is considering building a state-of-the-art logicmaking plant in the region, which will be able to upgrade chips to 3nm.

(Updated with details of earnings call from second paragraph)

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