Samsung Electronics has seen record quarterly revenue for the last quarter, up 20 percent on the previous year, with a boom in the components and foundry business but warned that chip shortages will continue as a result of Covid-19.
Revenue for Q2 was KRW63.67 trillion (US$72bn) with operating profits up 34 percent on the previous quarter to KRW 12.57 trillion (US$14bn) as market conditions improved in the memory market and the global supply chain management (SCM) improved
However, risks of continued disruptions in component supply and uncertainties related to Covid-19 are likely to persist, it said, and it is increasing foundry prices to support more investment in 5nm EUV process technology.
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The semiconductor business saw a significant improvement in earnings as memory shipments exceeded previous guidance and price increases were higher than expected.
Earnings at the Mobile Communications Business declined from the previous quarter due to component supply shortages and Covid-19 related production disruptions. The Consumer Electronics Division posted strong results driven by increased sales of premium products as demand remained strong.
For the second half, the company expects the market conditions to remain favourable for the component business. In smartphones and consumer electronics, the Company aims to maintain profitability by strengthening the line of premium phones and tablets rather than aiming for market share in the feature phones.
The Memory Business is expected to see continued demand growth for server and mobile products and the Company will accelerate migration to 15nm DRAM and 6th-generation 128 layer V-NAND memories as well as expanding the use of EUV lithography in DRAM production. Demand for key System LSI products is expected to increase as new smartphones are introduced, while the Foundry Business will accelerate growth by expanding the Pyeongtaek S5 Line capacity and by adjusting pricing to enable future investment cycles.
For the Display Panel Business, the mobile panel segment is expected to improve as major customers launch new flagship models and the Company will focus on finalizing the mass production process for quantum-dot (QD) displays for shipment to begin within the year.
The Networks Business will drive revenue growth in key markets, including North America, and continue to explore new opportunities in Europe and other regions.
The company spent KRW 23.3 trillion (US$26.3bn) in the quarter, with KRW 20.9 trillion (US$23.75bn) on semiconductors and KRW 1.4 trillion (US$1.6bn) for displays. Investment in the Memory Business was spent mainly on addressing future demand through capacity expansion and process migrations to advanced nodes. Investment in the Foundry Business focused on expansion for advanced processes such as 5nm EUV lithography, with 3nm gate-all-around (GAA) designs starting.
The semiconductor business posted KRW 22.74 trillion (US$24.8bn) in revenue for the second quarter and KRW 6.93 trillion (US$7.8bn) in operating profit. For DRAM, demand from datacentre companies was strong from solid growth in Cloud service while continued trends for remote work and education lifted demand for PCs.
Demand for mobile memory, however, saw a limited impact in the short term due to recurring waves of Covid-19 outbreaks at locations of global smartphone production bases and tight supplies of key components.
NAND shipments in the quarter also exceeded the previous bit growth guidance while the portion of 128-layer 6th-generation V-NAND continued to increase.
Looking to the second half of the year, the market is expected to see supply problems for components persist, as well as risks from the Covid-19 variants and geopolitical tensions. However, the memory market’s fundamentals remain strong on the back of increasing 5G adoption and sustained demand for servers and PCs.
Memory demand will likely be buoyed by new smartphone model launches, with the wider 5G availability driving growth in content-per-box. Increasing adoption of the latest CPU, along with growing enterprise PC demand to support the new remote work dynamics, is expected to support memory demand for servers and PCs. At the same time, Samsung’s chip inventory level has fallen to a substantially low level due to the stronger shipment last quarter than the previous guidance.
It is set to begin mass production of 14nm DRAM using the EUV-based process in the second half. Samsung will also start mass production of consumer SSD adopting the double-stack based 176-layer 7th-generation V-NAND, using the finest etching technology, during the second half.
The System LSI Business saw its earnings improve in the second quarter with a solid demand for 100Mp image sensors from Chinese customers and as production normalized at the Austin fab. However, improvement was somewhat limited due to a decrease in flagship smartphone launches and SoC demand amid weak seasonality.
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