Samsung forecasts Q1 operating profit up 50.3% year-on-year

SEOUL

Samsung Electronics expects operating profits for the first quarter to rise 50.3 percent, the South Korean tech giant said in a statement yesterday, despite global supply chain woes.

The world’s biggest smartphone maker forecast 2022 first-quarter operating profits of about 14.1 trillion won ($11.6 billion), up from 9.4 trillion won in the same quarter last year.

Analysts said the forecast was likely driven by strong smartphone sales, but warned of an expected drop in profits in the memory chip division.

“Price decline in memory chips will be contained on the back of stronger than expected demand,” Kim Un-ho, an analyst at IBK Investment & Securities, said in a report.

Profits in Samsung’s mobile business are expected to soar by 55.8 percent compared with the final quarter of last year to over 4.1 trillion won, offsetting an anticipated 6 percent decline in profits from its memory chips division, the report said.

With memory chips now used in a wide-ranging array of devices and cloud servers - essential for remote working in the pandemic era - the sector has become less dependent on seasonally-driven demand for gadgets such as smartphones and laptops.

Going forward, Kim forecast the conglomerate would make 60.5 trillion won in operating profits for 2022 overall, a 17 percent increase on-year.

But Samsung’s smartphones division was in hot water in its native South Korea recently over a pre-installed app called Game Optimizations Service on the latest Galaxy S phone lineup.

Designed to fine-tune system performances, consumers claim it actually throttled the speed of thousands of non-gaming apps.

The issue forced Samsung’s vice chairman, Han Jong-hee, to apologize at a shareholders’ meeting last month, and prompted a class action by nearly 2,000 consumers seeking 300,000 won in compensation each.

But sales of its latest Galaxy S22 series are likely to exceed 1 million units in South Korea in the first six weeks of release, selling at a 20 percent faster pace than the previous S21 edition.

The world’s biggest memory chip maker, Samsung Electronics has aggressively stepped up investment in its semiconductor business as the world battles chip shortages that have hit everything from cars and home appliances to smartphones and gaming consoles.

In November, it announced a new microchip factory in Texas, a $17 billion investment. The plant is expected to be operational by the end of 2024.