Samsung Electronics Co missed analyst estimates for the past quarter, and warned that profitability would likely decline this quarter, citing weakness in its memorychip business and challenges with currency fluctuations.
South Korea’s biggest company reported net income of 6.45 trillion won (US$5.8 billion) last quarter, missing the 7.3 trillion won average of estimates compiled by Bloomberg.
Samsung, the world’s largest maker of memory chips and displays, struck a cautious tone that stood in contrast to that of many technology companies benefiting during COVID-19 lockdowns.
Photo: AFP
“In the first quarter, we expect overall profitability to decline due to relative weakness in the memory and display businesses,” Samsung executive vice president of investor relations Ben Suh said during a call with investors.
In the memory business, Samsung’s most important profit engine, “results are likely to weaken due to currency effects and continued costs associated with new fab ramp-up.”
Operating profit for the semiconductor unit was 3.85 trillion won in the fourth quarter, short of the 4.62 trillion estimate from analysts. The company said it expects a recovery in the business in the first half of this year.
In the smartphone business, Samsung struggled in last month’s Christmas holiday period, as Apple introduced its first 5G-capable iPhones and Chinese rivals put up fierce competition.
Investors had hoped that Samsung could increase its dividend payout substantially, in part because the founding Lee family faces an enormous inheritance tax bill.
Instead, the company said it would continue to return 50 percent of free cash flow to shareholders from this year through 2023, although its annual dividend payout would increase slightly to 9.8 trillion won.
The company signaled that it would continue to press ahead with critical deals and investments. Samsung would use its capital to expand the capacity of its foundry business, which manufactures chips for clients like Nvidia Corp, to meet demand and overcome current supply shortages.
It would also invest in facility expansions and “meaningful” acquisitions, the company said.
“For the last few years, we have been evaluating possible M&A [merger-and-acquisition] opportunities very carefully and have made significant progress in terms of preparation,” Samsung chief financial officer Choi Yoon-ho said during the earnings call. “Although it is difficult to pinpoint a specific timing due to uncertainties in the internal and external business environment ... we are optimistic of carrying out meaningful M&A activities during this term.”
Samsung has a fab in Austin, Texas, which is capable of operating a 14-nanometer process.
With rising growth expectations in the foundry market, Samsung is considering building a cutting-edge logic chipmaking plant in the region that would be capable of fabricating chips on a process as advanced as 3 nanometer, Bloomberg News reported earlier.
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