Samsung sees chip crunch persisting after profit tops estimates

Seoul

SAMSUNG Electronics Co said the tight supply of chips that's hurting industries worldwide is set to persist through next year, as it reported quarterly profit boosted by rising prices at its semiconductor business.

The South Korean giant, both a major producer and consumer of chips that go into computers and mobile devices, said net income rose to 12.06 trillion won (S$13.9 billion) in the three months ended September.

Analysts predicted 11.54 trillion won on average, according to estimates compiled by Bloomberg. Samsung disclosed preliminary numbers earlier this month, including a more than 25 per cent increase in operating profit.

The world's biggest maker of memory chips and smartphones has benefited from strong demand as the global economy recovers from the Covid-19 pandemic, with a resulting shortage boosting semiconductor prices. While Samsung and its chipmaker rivals are spending more to add production capacity, the crunch isn't abating soon as consumers and companies continue to invest in technology.

"The pandemic led global consumers to experience more online-based social activities and lifestyles - which has been called the new normal - and we think most of the demand of the new normal will persist as a fundamental part of our life," JinMan Han, executive vice-president of Samsung's chip business, said on a conference call on Thursday.

The company didn't give forecasts for earnings or investment for 2022 because of uncertainties including supply bottlenecks and rising raw-material prices.

Samsung's smartphone shipments and average selling prices rose from the previous quarter, helped by the launch of new Z series foldable models. The company predicted a decline in mobile device shipments for this quarter compared with the preceding 3 months.

Shares of Samsung were little changed at 12.54 pm on Oct 28 in Seoul. They have lost more than 10 per cent this year, with industry observers predicting the memory-chip market will see prices on the decline.

While Samsung is better known for smartphones outside of South Korea, its profits are largely driven by its memory-chip business. Semiconductors typically account for the largest slice of its income.

Server clients have built up their inventories, putting pressure on memory suppliers to reduce prices. Rival SK Hynix Inc said on Tuesday the supply flexibility has changed from the past as chip suppliers manage capacity in line with demand, echoing Micron Technology's argument that the wide swings between shortages and gluts are moderating.

Still, chip suppliers remain optimistic demand won't fall off. Samsung said the widely expected downturn for the memory market is unlikely to be as severe as prior such episodes. BLOOMBERG