October 28, 2021

Samsung says component shortages to affect some chip demand; profit hits 3-year high

By ellen

SEOUL (REUTERS) – Samsung Electronics said on Thursday (Oct 28) it expects component shortages to affect chip demand from some customers in the current quarter, after reporting its highest quarterly profit in three years.

A longer-than-expected component supply issue may need to be monitored due to potential impact on the manufacturing of devices that use memory chips, the company said in a statement, although it added there was “strong fundamental demand for servers from increased investments from technology companies”.

The world’s top maker of memory chips posted a 28 per cent jump in operating profit in the July-September quarter to 15.8 trillion won (S$18.19 billion) on the back of an 82 per cent year-on-year profit surge in its chip business, where earnings rose to 10.1 trillion won.

Rising memory chip prices and shipments, plus a jump in profitability at Samsung’s chip-contract manufacturing business, boosted the chip division’s operating profit, while sales of Samsung’s new foldable smartphones were tempered by marketing and component costs.

Samsung said demand for Dram chips, which temporarily save data in laptops and smartphones, is expected to stay strong in the fourth quarter due to new CPU adoption and expansion of data centre investments, while personal computer manufacturing growth is expected to hold in line with the previous quarter.

Although supply chain issues could limit demand from some mobile chip customers in the fourth quarter, demand for server and personal computer chips is expected to be robust in 2022 despite uncertainties, it said.

It did not comment on the outlook for memory chip prices.

Production of devices during the year-end holiday season has been hit by a host of supply chain issues such as a shortage of manpower, logistics snarls, and the suspension of parts plants due to power shortages in China and a shortage of logic chip parts.

Smaller rival SK Hynix on Tuesday struck a more bullish note than United States peers and forecast steady demand for memory chips. Earlier, chipmakers Intel and Micron had said shortages of some components were stopping their customers from shipping PCs.

Samsung’s net profit rose 31 per cent to 12.3 trillion won. Revenue rose 10 per cent to a record 74 trillion won.

Its shares were flat in early trade on Thursday, compared with the wider market’s 0.2 per cent rise.