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(Bloomberg) -- Samsung Electronics Co.’s quarterly profit climbed more than 50% after chip prices stabilized and sales of smartphones surged, reinforcing hopes the memory industry will emerge from its downturn this year.
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South Korea’s biggest company posted operating income of 13.8 trillion won ($11.5 billion) for the three months ended December, missing estimates after it distributed special bonuses to employees. But revenue jumped a better-than-expected 23% to 76 trillion won. The company’s stock climbed as much as 2% in morning trade in Seoul.
Samsung and rivals SK Hynix Inc. and Micron Technology Inc. are weathering a cyclical downturn, helped by demand from servers as well as a widening array of products from cars to home devices. Micron last month predicted record revenue for fiscal 2022 thanks to resilient demand from data centers, networking and auto customers.
Investors are also monitoring Samsung’s operation in the central Chinese city of Xi’an, which has been locked down while the government fights a local outbreak. While it’s unclear how long that situation will persist in the city -- also a big Micron production center -- analysts say short-term disruptions might dampen supply and lift chip prices. Samsung will provide net income and divisional performance when it reports its full earnings on Jan. 27.
“Memory prices will rebound in the second quarter if the lockdown in Xi’an gets prolonged,” said CW Chung, head of Asia technology at Nomura Financial Investment. “And demand from servers is solid, while PC demand is better than the market feared.”
Read more: Chipmakers Seek Steady Growth to End Boom-Bust Era
What Bloomberg Intelligence Says
Samsung’s 1.4 trillion won 4Q operating profit miss vs. consensus may be partly due to a one-time incentive payment and also a lockdown in Xi’an, where it has a chip plant. Weakening memory chip prices may also affect its profit in 1Q22. Yet its 23% sales growth in 4Q vs. a year ago may suggest positive sales growth may continue in 1Q, coupled with the upcoming new Galaxy smartphone launch.
- Masahiro Wakasugi, BI analyst
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Samsung’s foundry business, fabricating semiconductors for the likes of Nvidia Corp., is also making a growing contribution to its bottom line, after the global chip shortage boosted prices for system chips.