"As Expected, Semiconductors" Samsung Electronics Q1 Earnings Soar... Entering the 300 Trillion Won Sales Era (Comprehensive)

Samsung Electronics Forecasts Record Q1 Revenue of 75 Trillion Won
Semiconductors and Galaxy S22... 'Key Contributors'
LG Electronics Also Nears 20 Trillion Won in Strong Performance

[Image source=Yonhap News]

[Asia Economy Reporters Jin-ho Kim and Sun-mi Park] Samsung Electronics and LG Electronics are expected to receive record-breaking first-quarter results for the first quarter (January to March) of this year. Despite the prolonged global spread of COVID-19 and supply chain disruptions caused by Russia's invasion of Ukraine, Samsung Electronics is expected to surpass 70 trillion KRW in sales for the first time in a first quarter. This is an unprecedented achievement during the typically seasonal off-season for the semiconductor and display parts industries in the first quarter. The strong performance is attributed to a faster-than-expected improvement in the semiconductor market and robust sales of premium home appliances and TVs. Analysts also note that the effect of stable parts supply through diversification of business partners played a role.

◆ Samsung and LG Electronics start strong amid supply chain crisis = On the 6th, financial information firm FnGuide reported that Samsung Electronics' average first-quarter consensus forecast is sales of 75.1454 trillion KRW and operating profit of 13.1031 trillion KRW. Compared to the same period last year, sales are expected to increase by 14.92% and operating profit by 39.65%. Net profit is also estimated to rise by 39.48% to 9.8927 trillion KRW in the first quarter.

This is the first time Samsung Electronics' first-quarter sales have exceeded 70 trillion KRW. After recording sales of 73.98 trillion KRW in the third quarter of last year, it is expected to surpass 70 trillion KRW in sales for three consecutive quarters. If this trend continues, Samsung Electronics will become the first domestic company this year to exceed 300 trillion KRW in sales and 60 trillion KRW in operating profit.

The main driver behind Samsung Electronics' record-breaking first-quarter performance is undoubtedly semiconductors. Thanks to a smaller-than-expected decline in memory semiconductor prices, the company easily overcame the traditional first-quarter "lean season," which is usually the weakest quarter. Considering the numerous internal and external challenges such as the COVID-19 pandemic, global supply chain crisis, and the Ukraine situation, this reaffirms the successful formula of "Semiconductors are Samsung."

With the semiconductor market improving faster than expected, there is growing optimism that this year’s semiconductor division will record sales exceeding 94 trillion KRW, far surpassing last year's performance when Samsung overtook U.S. Intel to become the world's number one semiconductor sales company for the first time in three years.

LG Electronics is also expected to achieve its highest-ever first-quarter sales of 19.8819 trillion KRW, a 5.7% increase compared to the same period last year. This growth is driven by strong sales of premium home appliances and TVs. However, operating profit is estimated to decline by 10.6% to 1.3559 trillion KRW, and net profit is expected to decrease by 8.87% to 909.8 billion KRW. This reflects the impact of supply chain disruptions amid uncertain global conditions such as the Russia-Ukraine conflict, which caused sharp increases in raw material prices and logistics costs.

◆ Soaring thanks to semiconductors = The so-called "semiconductor winter," initially expected to last until the first half of this year, ended sooner than anticipated. The semiconductor division's sales in Samsung Electronics' first-quarter provisional results are expected to exceed 25 trillion KRW, according to the semiconductor industry and securities firms. Although the first quarter is traditionally the off-season for the electronics industry, sales are expected to decline compared to the third and fourth quarters of last year, but the decrease will be modest, and a clear growth trend is visible compared to the same period last year.

The market expected first-quarter price declines of 6.2% for DRAM and 5.1% for NAND flash, but the actual situation was much better. According to TrendForce, last month’s DRAM fixed transaction prices remained flat for the second consecutive month without rising or falling. While DRAM prices are expected to continue declining in the second quarter, NAND prices may rebound by 5-10% in the second quarter due to reduced supply from global manufacturers.

Securities firms also pointed to this rapid recovery in the memory market as the reason behind Samsung Electronics' strong performance. Geun-chang Noh, a researcher at Hyundai Motor Securities, said, "Contrary to expectations that DRAM and NAND shipment volumes would decline by low single digits in the first quarter, they remained flat and increased by 3%, respectively." Do-yeon Choi, a researcher at Shinhan Financial Investment, also predicted, "The decline in memory semiconductor prices will be smaller than market expectations."

Positively, Samsung Electronics' semiconductor performance in the second quarter is also expected to be a "firework." Due to factory shutdown issues at major global NAND manufacturers such as Kioxia and Western Digital, Samsung Electronics is expected to benefit from a rebound, and the timing of semiconductor price recovery is anticipated to be accelerated due to prolonged parts supply issues. The foundry division, which had yield (ratio of normal products among manufactured products) issues, is also analyzed to be in a relatively good state recently. Due to the base effect of the U.S. Austin factory shutdown last year, significant sales growth is expected this year.

Both Samsung Electronics and LG Electronics are expected to be minimally affected by the external aftershocks of Russia's full-scale invasion of Ukraine. Although exports to Russia have been suspended due to the situation, the regional share is so small that it does not significantly impact overall performance. However, the industry expects that if raw material prices continue to surge, both Samsung and LG Electronics may face increased pressure on profitability in their home appliance divisions.

Meanwhile, the successful launch of Samsung Electronics' new flagship smartphone series, the Galaxy S22, released in the first quarter, also had a significant impact on the results. According to the industry, sales of the Galaxy S22 are expected to surpass 1 million units about two weeks earlier than its predecessor, the Galaxy S21. Considering its release at the end of February, this means an average daily sales volume of over 23,000 units.

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