Samsung Expects 28% Rise in Operating Profit

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Global Semiconductor Crunch Is Strengthening the World’s Largest Smartphone and Memory Chip Maker

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The Suwon, South Korea-based firm estimates revenue of 73 trillion won, a 9% gain from a year earlier.

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Analysts gathered by S&P Global Market Intelligence estimated about 15.7 trillion won in operating profit and 73.4 trillion won in revenue.

Samsung is due to report full earnings later this month. The South Korean company is considered a bellwether for the tech world as it manufactures major electronics products, while also serving as a component supplier to competitors, including Apple Inc.

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Samsung and other chip giants have seen their pricing power increase, as a pandemic-fueled growth in demand for semiconductors has created widespread shortages. Global traders expected the supply shortfall to be overcome by the end of this year. But the shortfall is likely to extend through 2022, if not longer.

The chip industry is on a major investment spree. Intel Corporation

recently said it would build new chip-making facilities in Europe, worth up to $95 billion, while Taiwan Semiconductor Manufacturing Co.

has said it will spend a record $100 billion over the next three years to increase production capacity.

To take the lead in chip manufacturing, Samsung said it plans to increase the investment by a third to more than $205 billion over the next three years.

Industry analysts say chip prices may see some stagnation in the coming months, though demand is expected to remain strong.

For the last three months of the year, contract prices for NAND flash memory, or storage on phones, computers and servers, may be flat or see a slight decline compared to the July-to-September quarter, according to a Taiwan-based research firm. can. Trendforce. Similar prices for DRAM, the device that enables multitasking, are expected to drop 3% to 8% as supply begins to exceed demand, Trendforce said.

While tight supplies help Samsung’s chip division, the South Korean firm’s phone business suffers due to non-availability of parts.

Almost the entire smartphone industry has been affected, with some vendors receiving only 70% of the chips they ordered, according to Counterpoint Research, a market-research firm. Due to supply issues, Counterpoint slashed its global forecast for smartphone shipments to 6% year-over-year growth in 2021. This is lower than earlier expectations of 9% growth.

Shares of Samsung Electronics have gained nearly 20% over the past year, though it has lagged behind a 24% gain in the benchmark Kospi index.

Timothy W. Martin at [email protected]

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