Samsung Elec sees component shortages persisting in H2, solid server chip demand

SEOUL, April 28 (Reuters) – Samsung Electronics Co Ltd (005930.KS) mentioned on Thursday it expects agency knowledge centre demand for high-margin reminiscence chips to proceed within the second half, however warned element shortages will possible persist as nicely.

The world’s high reminiscence chip and smartphone maker mentioned underlying server chip demand seems “comparatively strong” as firms enhance investments and look to new applied sciences to extend their enterprise.

“Corporations are actually increasing IT infrastructure, and cloud firms are increasing investments to discover new development areas like synthetic intelligence and machine studying,” mentioned Han Jin-man, government vice chairman of Samsung’s reminiscence chip enterprise throughout an earnings name.

“Nevertheless, there are nonetheless some elements provide points, which may result in disruptions. We’ll monitor demand fluctuations very carefully and intend to offer provide that matches the demand,” he mentioned.

Samsung forecast weaker demand for cell phone and private pc chips in Q2 as shoppers climate points corresponding to rising inflation and COVID-19 lockdowns, however company PC demand is anticipated to stay strong, whereas extra 5G-capable telephone rollouts within the second half may raise cellular demand.

Reminiscence chip rival SK Hynix (000660.KS) provided an identical outlook on Wednesday. learn extra

Analysts mentioned Samsung’s latest give attention to promoting extra high-margin reminiscence merchandise to prioritise profitability over quantity would in the end restrict shipments and assist enhance DRAM costs later within the 12 months, as would the restricted will increase in chip manufacturing capability on account of supply delays in chipmaking gear.

Within the chip contract manufacturing enterprise which counts Qualcomm (QCOM.O) and Nvidia (NVDA.O) as shoppers, Samsung mentioned its order guide for the subsequent 5 years was eight occasions its 2021 income.

It plans to win extra top-tier prospects for chip manufacturing in fields exterior cellphones, corresponding to excessive efficiency computing, community tools and the automotive business.

Samsung forecast continued development within the smartphone market within the second half regardless of element shortages, and anticipated the foldable telephone market to double in dimension from the earlier 12 months.

The South Korean large confirmed a 51% rise in working revenue to 14.1 trillion gained ($11.1 billion) for the quarter ended March 31, in step with its earlier forecast. It was the corporate’s highest first-quarter revenue since 2018.

Nonetheless, Samsung shares traded down 0.6% on Thursday, in contrast with a 0.7% rise within the wider market (.KS11), extending a year-to-date fall of 17%.

“Samsung’s inventory value is a market difficulty, somewhat than a problem arising from the corporate,” mentioned Park Sung-soon, analyst at Cape Funding & Securities.

“Previously, when the reminiscence chip business was very cyclical, there was excessive visibility in demand, so funding was attractively predictable. However now there are all these macro points and low demand visibility.”

Income at its chip enterprise rose to eight.45 trillion gained, greater than double the three.36 trillion gained a 12 months earlier, fueled by report gross sales of server chips within the quarter.

Income on the cellular and community enterprise got here in at 3.8 trillion gained within the first quarter, down 13% from a 12 months in the past. Gross sales had been supported by ramped-up manufacturing of the mid-to-low-end Galaxy A sequence and the launch of Samsung’s flagship Galaxy S22 sequence, mentioned Canalys analyst Sanyam Chaurasia.

General income rose 19% to a report 77.8 trillion gained.

($1 = 1,271.3900 gained)

Reporting by Joyce Lee and Heekyong Yang; enhancing by Richard Pullin

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