Samsung Electronics Co beat analyst estimates for profit in the first quarter, but warned of continued fallout from semiconductor shortages as the global economy recovers from the Covid-19 pandemic.
South Korea’s largest company reported net income of 7.1 trillion won ($6.4 billion) for the three months ended March, beating the 6.7 trillion won average of estimates compiled by Bloomberg. Revenue rose 18% for the period.
The Suwon-based conglomerate has been riding a boom in stay-at-home demand for smartphones, PCs, home appliances and cloud services. But Samsung lost out on chip sales when a factory in Austin, Texas, was knocked offline, exacerbating shortages that have hit companies around the world.
Just before the company’s results, major automakers Ford Motor Co and BMW AG warned of deeper-than-expected hits to production because of the shortages. Even Apple Inc voiced concerns.
Samsung said it will step up production to address the shortages and forecast that chip earnings will increase substantially in the second quarter. The company, which makes memory and logic chips, said its Texas plant has resumed normal operations.
“We expect our profits to improve significantly” with memory demand from the mobile business likely to be strong even with shortages of other components, said Han Jin-man, executive vice president of the semiconductor business, on a conference call with investors.
Samsung’s shares stood mostly unchanged in early Thursday trading in Seoul.
The results come as South Korea’s largest company is going through a tumultuous change in ownership. Lee Kun-hee, patriarch of the founding Lee family, died last year, triggering one of the largest inheritance tax bills in history.
His heirs said Wednesday they would pay more than 12 trillion won ($11 billion) in taxes and donate approximately 23,000 works of art. They haven’t yet detailed how family members will divvy up ownership of Samsung Electronics and other parts of the conglomerate.
After the outage in Texas, first-quarter profit declined at the company’s giant memory chip division, which provides key components for smartphones and servers. But Samsung forecast a strong recovery in the business thanks to server and storage demand, and a rebound in economic activity.
Growth in 4K and high-definition streaming services helped maintain strong demand for consumer gear like TVs, said Han.
Still, the chip crunch shows signs of disrupting Samsung’s own devices arm. The company warned that both revenue and profit at its mobile division, which produces its marquee Galaxy smartphone line, will slide this quarter because of component shortages and weak demand for flagship models.
The mobile display business is likely to see a quarterly slowdown, affected by extended seasonal effects and component shortages.
Samsung had previously warned of a serious imbalance in the chips market, while rival Taiwan Semiconductor Manufacturing Co. said this month that shortages could extend into next year. The Korean company is currently evaluating U.S. sites for an advanced $17 billion plant it hopes will propel its ambitions of competing with TSMC in the pivotal market for made-to-order chips.
Samsung elaborated on its ambitions to expand in the foundry business, a lucrative growth segment that TSMC has dominated. It plans to expand supply in the second half of the year through the start of mass production at its Pyeongtaek Line 2, senior vice president Shawn Han said.
“Although there are concerns that a setback in mobile production following the components shortage may bring a negative effect to memory demand, the chip business sentiment is still very solid,” said Song Myung-sup, analyst at HI Investment & Securities.
Shares in Samsung, one of the biggest beneficiaries of last year’s surge in online and mobile activity, have almost doubled from a March 2020 trough.