[Click eStock] "Semiconductor Earnings Improvement in Sight: Samsung Electronics Expected to Recover Operating Profit of 10 Trillion KRW from 2Q"

DRAM Prices Rise and NAND Demand Increases... Industry Outlook 'Clear'
Operating Profit Expected to Increase by 10 Trillion Won in Semiconductors This Year

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Samsung Electronics is expected to recover its operating profit to the 10 trillion won level starting from the second quarter. This is due to a clear improvement in performance in the semiconductor and other component businesses driven by full-scale price increases and supply-demand improvements, while demand for set businesses such as smartphones and home appliances is also showing a steeper recovery than expected.

On the 3rd, KB Securities maintained a 'Buy' investment opinion and a target price of 105,000 won for Samsung Electronics based on these factors. The closing price on the previous day was 83,600 won. Although performance is expected to be somewhat sluggish in the first quarter, improvement is anticipated from the second quarter onward.

For the first quarter, performance is expected to decline in all business divisions except for smartphones (IM). KB Securities estimated that Samsung Electronics will achieve sales of 62.8 trillion won and an operating profit of 8.6 trillion won in the first quarter. The operating profit is expected to slightly exceed the market consensus of 8.47 trillion won. Dongwon Kim, a researcher at KB Securities, explained, "Despite improvements in memory performance such as DRAM and NAND in the semiconductor sector, operating profit is estimated to decrease compared to the previous quarter due to increased initial costs of new foundry fabs and the suspension of operations at the Austin plant in Texas, USA. The smartphone and home appliance sectors are expected to achieve favorable results due to increased smartphone shipments following the launch of the Galaxy S21 and strong sales of QLED TVs."

From the second quarter, a recovery trend is expected. It is forecasted to recover to the 10 trillion won level in operating profit for the first time since the third quarter of last year, which recorded 12.3532 trillion won. Researcher Kim predicted, "Component businesses such as semiconductors and displays are expected to show clear performance improvements due to full-scale price increases in DRAM, supply-demand improvements in NAND, and increased operating rates of OLEDs. Demand recovery in set businesses such as smartphones and home appliances is exceeding expectations. In particular, due to the price increase caused by the shift to DRAM supply shortage this year, semiconductor operating profit is expected to reach 28.7 trillion won, an increase of about 10 trillion won compared to the previous year."

Accordingly, KB Securities estimated that Samsung Electronics' operating profit this year will reach 49.5 trillion won, an increase of 38% (about 13.5 trillion won) compared to last year. It is expected that the semiconductor sector alone will see an increase in profit of about 10 trillion won. Researcher Kim analyzed, "In particular, server DRAM prices in the second quarter are expected to rise by 10-15% due to new server expansions by North American data center companies and increased demand for cloud migration, with 32GB prices expected to rise by up to 20%. Additionally, the average selling price (ASP) of NAND is exceeding expectations from this month due to strong PC demand, significantly slowing the price decline in the second quarter and expected to turn upward in the third quarter."