Samsung Electronics Co on Thursday reported record quarterly revenue and posted net profit 31% higher, due to booming demand for memory chips.
The South Korean company posted third-quarter net profit of 12.29 trillion won ($10.5 billion), up from 9.36 trillion won a year earlier.
Samsung, the world’s largest memory-chip and smartphone maker, reported revenue of 73.98 trillion won for the quarter ended September 30, a 10.5% rise from the prior year.
“For the fourth quarter, the company will focus on meeting demand for memory and system semiconductor products even as component shortages at some customers may affect demand,” Samsung said.
Tripling Production
The company plans to triple its chip foundry production capacity by 2026, Shawn Han, senior vice president of the company’s US chipmaking operations, said on the company’s earnings conference call.
Han said Samsung would expand its production lines in Pyeongtaek, south of Seoul, and might build a new factory in the US.
The company expects a recovery in global information technology demand but cautioned against “uncertainties related to component supply disruptions and Covid-19”.
Samsung expects demand for home appliances to weaken next year as people are likely to spend less time at home as the economy transitions to “living with Covid-19”.
Chip Downcycle
The company’s shares have lost more than 10% this year, with analysts predicting that memory chips could be entering a downcycle. The stock rose just 0.3% in early afternoon trading in Seoul to 10,300 won.
Memory prices are likely to decline from the fourth quarter, due to inventory adjustments triggered by global supply-chain issues.
“Share prices of global memory-chip makers have fallen since August due to market concerns about a potential downturn in memory prices,” said SK Kim, equity analyst at Daiwa Capital Markets in Seoul.
In the case of smartphones, Samsung faces lower supply and rising costs some of which are being passed on to consumers, analysts say.
“If the Chinese economy is perceived to slow, then the marginal competition from this extremely large market will make it more probable to have a price war between Samsung and Apple,” said Sebastien Galy, senior macro strategist at Nordea Asset Management in Luxembourg.
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