Major tech group Samsung Electronics Co. Ltd. expects to maintain its strong momentum this year, as it suggested another record first-quarter earnings result on Friday.
Announcing primarily guidance for its first-quarter 2018 financial period, the South Korean company forecast January-March operating profit to rise by 57.6 percent from the previous year to ₩15.6 trillion ($14.7 billion), beating analysts’ estimate of ₩14.5 trillion.
Total revenue are projected at ₩60 trillion ($56 billion), adding 18.7 percent from ₩50.55 trillion in the same quarter last year.
Samsung’s Mobile Business Drives Revenue
Samsung’s mobile business, which accounted for 40 percent of revenue in 2017, was cited as a significant contributor for the record numbers.
That was largely due to the company’s new Galaxy S9 and S9+ smartphones, which has received positive market response after its release in late February. Last year’s S8 and S8+ helped bolster the Suwon-based manufacturer’s second-quarter profits as well.
A research firm estimated 9.3 million units of Samsung flagship device were shipped in the first quarter, with analysts expecting the Galaxy S9’s full-year sales performance to be like those of its predecessors.
Still, some grew concerned that Apple Inc.’s iPhone X may be affecting the sales momentum of the Galaxy S9. Samsung did not go into detail about its performance and will release final earnings results most likely in April 26.
Semiconductor Industry Forecast
Even with an optimistic outlook for its first-quarter earnings, shares of Samsung closed 0.7 percent lower to ₩2,420,000 on Friday.
The drawback came after investment firm UBS AG stated that it expects DRAM chips supplies to grow, which weakened Micron Technology Inc.’s shares by 6.6 percent to $49.84 percent on Thursday. Stock price of the chipmaker was still down by 3.6 percent to $48.00 in pre-market trading.
Analysts said memory chips were still the main driver of Samsung’s profits, making up about 75 percent of its operating income, despite fears over the possibility that the industry cycle may have peaked.
Analyst Kim Yang-jae said demand for servers has offset sluggish sales for iPhone X as well as premium Chinese smartphones, and that demand is surpassing market expectations.
However, Analyst Kim Young-woo stated that the semiconductor industry could still slow in 2019, as RAM demand from major clients, such as Apple and social network giant Facebook Inc. might grow weaker, adding that Samsung is likely to trim down its capital expenditure for memory chips next year.
Prices of NAND chips already started to lose momentum in late 2017 and analysts have been keeping a close eye on any signs that may indicate a peak in the price of DRAM. Nevertheless, the smartphone maker is still expected to post another year of record profit.
Analyst Greg Roh said lower prices could help raise the demand for chips, which Samsung has the cost-cutting ability to keep profits up.
Considering the company’s whole memory business, Samsung is still expected to bring in higher profits this year.
DRAM supply is forecast to remain tight in the first half on strong server demand, even if the establishment of new chip manufacturing plants is increasing quickly.
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