Strong demand for memory chips and smartphones helped Samsung Electronics Co. deliver its best first-quarter earnings results in four years.
The company, which is the world’s largest memory chip and handset manufacturer, said today that its operating profit jumped by an impressive 51%, to 14.1 trillion won ($11.1 billion), beating analyst’ expectations of 13.2 trillion won. The company also reported record consolidated revenue of 77.78 trillion won ($61.4 billion), up 19% from the same period one year ago.
The world’s technology industry has been hit hard by a shortage of components for chipmaking that has been blamed on booming global demand and disruption to supply chains caused by the COVID-19 pandemic. However, the shortages have been extremely beneficial to Samsung, with the price of memory chips that are used in computers, data centers and mobile devices rising substantially, helping the company achieve record sales.
Memory chips accounted for the bulk of Samsung’s revenue, with sales of 26.87 trillion won fueling an 8.45 trillion won operating profit for the business in the first quarter.
Gloria Tsuen, vice president of Moody’s Investors Service, told Agence France-Presse that Samsung continues to be lifted by the semiconductor segment, thanks to strong demand for both dynamic random-access memory and NAND flash chips from the data center industry.
In addition, Samsung has benefited from disruption at a rival NAND flash fab owned by Western Digital Corp. and Kioxia Holdings Corp. that has led to “reduced market supply,” the analyst said.
During the quarter, it was revealed that Samsung surpassed its biggest rival Intel Corp. to become the world’s biggest seller of semiconductors in terms of revenue.
Samsung has also been aggressively ramping up its investments in its semiconductor business. In November, the company announced plans to build a $17 billion chip factory in Texas, its second in the U.S. The plant will make advanced semiconductors that can be used to power smartphones, 5G and artificial intelligence workloads. It’s expected to create 2,000 new high-tech jobs in the state.
“Memory chip makers generally need to keep capacity high to support technology migration,” Tsuen said. “Samsung is also in the foundry segment, and the new fab in Texas is an example of increased investment in that area as well.”
Samsung’s other main business is its handset unit, which delivered 32.3 trillion won in revenue and a profit of 3.82 trillion won during the first quarter. Analyst firm Counterpoint Technology Market Research said the company’s new flagship smartphone, the Galaxy S22 series, sold 60% more units than the S21 phone it replaced during the first three weeks of going on sale in the U.S.
“Strong sales of the Galaxy S22 series since its launch in Q1 helped drive the revenue growth, on the back of Galaxy S22 Ultra with S-Pen garnering positive feedback from the existing Galaxy Note customers,” Samsung said in a statement.