Samsung Electronics Austin Plant Normalizes... Semiconductor Production Also Expected to Rise in Q2

Q1 Mobile and Home Appliances Drive Performance
Samsung Electronics Austin Plant Normalization... Losses of 300 to 400 Billion KRW
Q2 Industry Improvement Expected, Semiconductor 'Jump Up'
'Tokyo Olympic Special' Home Appliances Also Anticipated

[Asia Economy Reporter Su-yeon Woo] Samsung Electronics achieved record-high sales for the first quarter, driven by strong performance in the home appliances and mobile divisions. The semiconductor division was the only segment to see a decline in performance due to losses from the suspension of operations at the Austin plant in the U.S., but from the second quarter onward, the semiconductor division is expected to lead overall company performance with rising memory semiconductor prices and the full-scale operation of the Pyeongtaek 2 foundry plant.

In Samsung Electronics' finalized first-quarter results announced on the 29th, operating profits increased year-on-year across all divisions except for semiconductors, including home appliances, mobile, display, and Harman.

◆ Home Appliance Pent-up Demand and Mobile New Product Effects Drive Growth= In particular, the mobile division benefited from the special demand for the new ‘Galaxy S21’ model, and the home appliance division saw a significant increase in profits due to expanded sales of premium products.

Initial sales of the new ‘Neo QLED’ were strong, and customized Bespoke home appliances received positive responses worldwide. Mobile sales also increased for both the Galaxy S21 flagship smartphone and mid-to-low-end smartphones, while the sales proportion of Galaxy ecosystem products such as tablets and wearables grew, significantly boosting profits.

The display business saw a decline in performance compared to the previous quarter due to the smartphone off-season, but growth continued year-on-year as OLED adoption expanded even to entry-level smartphones. Large displays improved profitability due to panel price increases, but performance declined quarter-on-quarter due to line reorganization in preparation for next-generation TVs.

In the semiconductor division, the suspension of operations at the Austin plant caused disruptions in the foundry business, resulting in the only year-on-year decrease in operating profit among all divisions.

◆ Second Quarter, Semiconductor and Mobile ‘Baton Pass’= From the second quarter, the Austin plant is expected to fully normalize operations, and mass production at the Pyeongtaek 2 foundry line will begin in earnest in the second half, leading to a ‘jump up’ in semiconductor division performance. Conversely, the mobile division, which led overall performance until the first quarter, is unlikely to achieve the same strong results due to supply chain impacts on semiconductors and other components.

From the second quarter, the semiconductor division is expected to see a full-scale improvement in market conditions driven by strong demand for PCs, servers, and mobile devices. During the conference call, Samsung Electronics stated, "In the second quarter, DRAM may face some production risks due to component supply issues in mobile, but demand will remain solid due to 5G market expansion and increased capacity," adding, "The server market will also see increased shipments with the launch of new CPUs, and demand for cloud applications will continue steadily."

To prepare for this market improvement, Samsung Electronics plans to accelerate the transition to 15nm DRAM and 6th-generation V-NAND, and strengthen market leadership by expanding the application of EUV (Extreme Ultraviolet) lithography equipment in production lines. From the second half, they plan to begin full-scale mass production of 14nm DRAM and 176-layer 7th-generation V-NAND using EUV equipment to maintain technological gaps with competitors.

Meanwhile, the home appliance division is buoyed by expectations ahead of the major sports event, the ‘Tokyo Olympics,’ in the second quarter. Samsung Electronics aims to capture demand not only from the sports event but also from the continuously growing home entertainment market through promotions centered on high-definition, extra-large TVs.

Supported by these rosy prospects, the securities industry forecasts Samsung Electronics’ annual performance this year at approximately KRW 266.21 trillion in sales and KRW 47.6 trillion in operating profit. Won-sik Lee, a researcher at Korea Investment & Securities, said, "Although the set business division’s performance will deteriorate due to slowing smartphone shipments and rising panel prices, the increase in memory semiconductor prices and the restart of the Austin plant will offset the decline in set business profits with semiconductor operating profit," adding, "Quarterly performance improvement is expected to accelerate from the second quarter."

This content was produced with the assistance of AI translation services.