Server chips, smartphones propel Samsung's record sales in Q1

Samsung Electronics' Pyeongtaek plant in Gyeonggi Province / Courtesy of Samsung Electronics

By Baek Byung-yeul

Samsung Electronics renewed its quarterly sales record in the first quarter despite various unfavorable business conditions such as the prolonged pandemic, global supply chain disruptions and Russia's invasion of Ukraine, the company said Thursday.

The tech giant announced its sales in the first quarter came in at 77.78 trillion won ($61.11 billion), up 18.95 percent from a year ago, while operating profit reached 14.12 trillion won, increasing 50.5 percent year-on-year.

The improved performance was possible thanks to robust demand for memory chips for servers and strong sales of smartphones including the Galaxy S22 Ultra, Samsung said.

Although the first quarter used to be regarded as a slow season in the semiconductor and display industries, Samsung achieved unprecedented performance during the January-March period. Since the company surpassed quarterly sales of 70 trillion won for the first time in the third quarter of 2021, Samsung achieved more than 70 trillion won in sales for the third consecutive quarter.

The Device Solutions (DS) division in charge of the chip business posted 26.87 trillion won in sales and 8.45 trillion won in operating profit in the first quarter.

“The performance of the memory business exceeded market forecasts as memory prices declined less than the market expected thanks mainly to solid demand from servers and PCs. However, the company saw a slight profit decline due to a one-off special incentive and mild seasonality in some applications,” Samsung said.

Samsung said its mobile business also helped boost the company's quarterly performance.

“Strong sales of the Galaxy S22 series since its launch in the first quarter helped drive the revenue growth, on the back of the Galaxy S22 Ultra with the S-Pen garnering positive feedback from existing Galaxy Note customers. Mass-market 5G smartphones including the new A-series as well as Device Ecosystem products, such as tablets including the Galaxy Tab S8 and wearables, also contributed to the profit growth,” the company said.

Regarding the foundry business, which the market believes will be struggling with lower-than-expected productivity, Kang Moon-soo, senior vice president and head of the company's foundry market and strategy team, said the division is working on securing stable production capacity.

“The 5-nanometer process has entered the stage of a mature yield rate and is maximizing supply to major customers,” Kang told investors during a conference call. “The expansion of production in the initial stage of the 4-nanometer process was somewhat delayed, but we are currently entering the expected yield improvement curve by focusing on stabilization.”

So far, there have been concerns in the market that Samsung's foundry production capability using the 4-nanometer process is being delayed longer than expected.

In response, Kang said, “Contrary to concerns, the supply shortage will continue as demand from major customers is stronger than that of Samsung Electronics. We have signed long-term supply contracts with many major customers and will increase supply stability through stable fab operations.”

Samsung believes macroeconomic uncertainties and logistics issues will continue in the second quarter, but its memory chip business will actively respond to strong demand from servers and focus more on high-priced products. Its smartphone and TV businesses will expand the release of new products and work on retaining market leadership with premium products.'

Predicting the company's future performance, Song Myung-sub, an analyst at Hi Investment & Securities, said, “Samsung's future earnings outlook depends on the recovery of macroeconomic conditions. As seen in previous years, this is more important than its current performance."

“The key is whether there will be signs of a possible economic recovery in the future after the interest rate hike in the United States and China's economic support measures,” the analyst added.