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Samsung Announces 53% Q2 Profit And Aims At TSMC

Despite low smartphone sales, Samsung Electronics Co Ltd (KRX:005930) expects a 53% increase in Q2 operating profit, surpassing market estimates. Shou...

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This story originally appeared on ValueWalk

Despite low smartphone sales, Samsung Electronics Co Ltd (KRX:005930) expects a 53% increase in Q2 operating profit, surpassing market estimates. Should predictions be fulfilled by the end of July, it would be its biggest second-quarter profit since 2018.

rieo / Pixabay via Valuewalk

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Q2 2021 hedge fund letters, conferences and more

Samsung wants to become the world’s largest chip manufacturer

The outcome anticipated by the Korean giant is up 33% from its Q1 results and is rooted in consumers’ and data centers’ sky-high demand for chips that has drained supply chain capacity during the pandemic.

According to Reuters, Samsung’s profit for the quarter that ended June 30 “was likely 12.5 trillion won ($11 billion), well above a Refinitiv SmartEstimate of 11.3 trillion won,” with the company expecting an even stronger Q3 due to the price increase of mobile DRAM memory chips, as well as the peak seasons for mobile and display businesses.”

“One of the most-anticipated elements in the earnings call later this month is how much the chip contract manufacturing business has progressed in competitiveness, and the current status of foundry customers and orders,” said Lee Won-sik, analyst at Korea Investment & Securities.

The high chip profits overshadowed the deep quarter-over-quarter collapse in smartphone shipments. Chip shipments increased beyond expectations, especially the DRAM type, usually used in servers, smartphones, and other computing devices.

“Improved yield in cutting-edge 1z nanometre DRAM chip production using ASML's extreme ultraviolet lithography (EUV) machines also likely lessened costs from the first quarter,” analysts told Reuters.

On the hunt to semiconductor’s top spot

In 2020, Samsung’s market share in the $66.3 billion global DRAM market was 41.7%, followed by SK Hynix Inc (KRX:000660) with 29.4% and Micron Technology Inc (NASDAQ:MU) with 23.5%.

Samsung's operating profit has been strongly driven by the memory business, so the company is now seeking to invest $150 billion in non-memory chips and the foundry sector, with an eye to overtaking Taiwan Semiconductor Mfg. Co. Ltd. (TPE:2330) and becoming the world’s top semiconductor company.

In the meantime, Micron is playing catch-up with Samsung as it is planning volume shipments of 1-alpha node DRAM devices sporting the industry's most advanced DRAM process technology. Micron is the first chip manufacturer to mass-produce 1-alpha node DRAM products.

At present, Samsung manufactures 15-nanometer DRAM chips, but the company will start volume shipments of 14-nanometer DRAM chips in the second half of this year, not to lose ground on the semiconductor market.

As reported by the Korea Times, Samsung Vice President Han Jin-man appears “to be stressing Samsung's competitiveness at a time when Micron is making strides.”