Samsung Elec targets smartphone growth in 2022, sees strong demand for chips

SEOUL, Jan 27 (Reuters) – Samsung Electronics Co Ltd (005930.KS) said it aimed to capture a bigger share of the smartphone market this year with more 5G-enabled models, and pointed to a possible price rebound of its flagship memory chips. from the first half.

The world’s biggest maker of memory chips and smartphones predicted a recovery in global demand for tech devices on Thursday after reporting its best fourth-quarter profit in four years, although it warned of ongoing challenges. supply chain issues and COVID-19.

Next-generation 5G smartphones are expected to account for more than half of all smartphone sales in the market in 2022, Kim Sung-koo, vice president of mobile business, said during an investor briefing.

“Our mass-level strategy is to actively capture demand from people looking to replace their phones with 5G models,” Kim said, adding that the company would pursue more “global blockbuster models.”

Analysts said it would pit Samsung, which has around 20% of the global smartphone market, against low-cost Chinese rivals like Xiaomi, OPPO and Vivo in markets outside of China.

The South Korean tech giant was also cautiously optimistic about the possibility of a turnaround in the price of DRAM chips, widely used in data centers and tech devices.

“We expect strong fundamental demand centered on servers and solid mobile demand thanks to the expansion of 5G models,” said Han Jin-man, executive vice president of the memory chip business.

“Some organizations have predicted that DRAM prices could reverse in the first half. We believe this is a possible scenario,” he added, while noting that supply issues, material costs commodities and geopolitical risks remain unknown variables.

The price of DRAM chips fell 9.5% in the fourth quarter from the previous quarter, according to TrendForce data, and analysts expect further declines in the current quarter. Opinions are divided as to when they will rebound.

For non-memory chips, Samsung said supply is expected to remain tight due to increased adoption of 5G-enabled devices, demand for high-performance computing, increased outsourcing from design companies and chip manufacturing and continued inventory demand.

The company spent 90% of its 48.2 trillion won ($40.1 billion) annual capital expenditure in 2021 on the chip business, but declined to give guidance for 2022.

CHIP BENEFITS

Samsung posted a 53% rise in operating profit in the fourth quarter to 13.9 trillion won ($11.6 billion). Profits from its chip business, its largest division, more than doubled from the same quarter a year ago to 8.84 trillion won.

Still, analysts said earnings fell short of market expectations due to conservative memory chip shipments, R&D costs and one-time year-end bonuses.

Samsung said it was below its initial guidance for memory chip shipments after deciding not to push aggressively to boost sales, signaling a push to prioritize profit over volume.

“Samsung appears to have factored in its low memory chip inventory, lack of cleanroom space to ramp up production in 2022, and lower memory chip prices last quarter, and decided not to sell as many” , said Park Sung-soon, an analyst at Cap Investissement & Titres.

“This trend of profitability rather than volume could continue into the first and second quarters, depending on market conditions.”

Samsung said it is still looking for M&A opportunities.

“We need to maintain the ability to invest in inorganic growth opportunities,” said Ben Suh, executive vice president of Samsung, when asked about investor returns.

Operating profit from Samsung’s mobile business rose about 9.9% year-on-year to 2.66 trillion won in the fourth quarter.

On Wednesday, Samsung said it would unveil its latest flagship smartphone model on Feb. 9, which analysts expect mobile phone shipments to pick up.

Net profit rose 64% to 10.8 trillion won. Revenue rose 24% to a record 76.6 trillion won.

Shares of Samsung fell 2.5% in afternoon trade on Thursday, compared with the broader market’s 3.2% decline (.KS11).

($1 = 1,202.8400 won)

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

Our standards: The Thomson Reuters Trust Principles.