Samsung Electronics sees record Q1 operating profits amid larger uncertainties

Posted on : 2022-04-08 16:31 KST Modified on : 2022-04-08 16:31 KST
Despite its strong performance, the company still has one of the worst stock price growth rates among chipmakers
The offices of Samsung Electronics in Seoul’s Seocho District (Yonhap News)
The offices of Samsung Electronics in Seoul’s Seocho District (Yonhap News)

Samsung Electronics announced Thursday that it recorded 77 trillion won in sales and 14.1 trillion won in operating profit in the first quarter of this year in the company’s earnings guidance.

Despite the strong performance, however, it’s not all good news for Samsung as it does damage control for its “Game Optimizing Service” fiasco and faces questions about the company’s competitiveness in the foundry industry.

Samsung Electronics’ sales in the first quarter of this year marked its best quarter to date. After exceeding 70 trillion won in sales for the first time in the third quarter of last year (July-September), the company has continued to exceed 70 trillion won in sales for three consecutive quarters.

Compared to the same period last year, sales were up 17.76%, with operating profit up by 50.32%. Compared to the previous quarter, sales and operating profit were up 0.56% and 1.66%, respectively. This slightly exceeded the average market forecast based on the FnGuide figures from Wednesday which predicted sales of 75.2565 trillion won and an operating profit of 13.11 trillion won.

Samsung’s strong performance in the first quarter — often considered the off-season in the electronics industry — is credited mainly to increased sales of new smartphones such as the Galaxy S22 and steady demand for memory semiconductors concentrated in the data center industry.

Still, Samsung Electronics’ stock price closed at 68,000 won on Thursday, down 0.73% (500 won) from the previous day’s closing price, still unable to escape the 60,000-won range. While there are various macroeconomic uncertainties such as the US Federal Reserve’s austerity measures that could be having an impact, some are voicing concerns about some “strange signals” coming from Samsung given the large gap between its stock prices and that of other major semiconductor companies around the world.

According to a report released Monday by Lee Seung-woo, a researcher at Eugene Investment, Samsung Electronics has been at the bottom of the list in terms of stock price growth compared to 16 major global semiconductor companies for the past five quarters.

During this period, Taiwan’s TSMC saw a cumulative stock price growth rate of 14%, and Qualcomm and Intel each rose by 2%. On the other hand, Samsung Electronics saw its stock price fall by 14%. That put it lower than SK Hynix, which maintained a steady price.

“The semiconductor industry continues to be strong this year, but there are questions about Samsung Electronics' technical skills and future,” the report read.

Samsung Electronics’ recent mobile application processor (AP) market share has fallen to less than 5%, and the yield of its 4-nano process is only around 30%, raising doubts about the company's technological competitiveness. In particular, last month, Nvidia, a large customer of Samsung Electronics' foundry business, decided to entrust the consignment production of its latest graphic processing unit (GPU), the H100, to TSMC's 4-nano process, raising concerns about Samsung losing big clients.

In a report released on Thursday, Do Hyeon-woo, a researcher at NH Investment & Securities, said, “The foundry’s performance was poor [in the first quarter] due to the latest process yield issues,” adding, “Second-quarter operating profit is expected to rise to 14.9 trillion won, led by semiconductor memory sales.”

By Sun Dam-eun, staff reporters

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