(Bloomberg) – Samsung Electronics Co. ‘s profit missed analysts’ estimates and the company warned of weaker results in the first quarter as competition with smartphones intensified and memory prices remained weak.
South Korea’s largest company reported net income in the three months ended December of 6.45 trillion won ($ 5.84 billion), and the average of 7.3 trillion won calculated by Bloomberg. Samsung has also announced that it will increase its annual dividend payout to 9.8 billion won and return 50% of the free cash flow to shareholders between 2021 and 2023.
Shares fell 2.8% in Seoul on Thursday before recovering.
The profit from Samsung’s semiconductor business did not estimate anymore due to the low prices for memory chips, although the company said it would recover in the first half. In the smartphone industry, the world’s largest mobile phone maker struggled during the holiday season when Apple Inc. launches its first iPhones with 5G devices and gives Chinese competitors fierce competition.
With very good devices on the market, “there is just so much Samsung can get out of it,” said Kiranjeet Kaur, research manager at IDC.
Samsung will expand the capacity of its foundry, which manufactures chips for customers such as Nvidia Corp., to meet demand and overcome the current supply shortage. The company will also use resources “actively” for further strategic expansion of facilities and “meaningful” acquisitions.
Preliminary figures released earlier this month showed Samsung’s operating profit up 26%.
A strong profit and cost associated with new production lines weighs on Samsung’s semiconductor business, the company said. The operating profit for the semiconductor device was 3.85 trillion won, less than the estimate of 4.62 trillion from analysts. Samsung has warned that exchange rate and uncertainty surrounding the distribution of Covid-19 will have a negative impact.
Read more: Samsung rises to new high with strong memory market outlook
Demand for more powerful 5G smartphones and the build-up of server stock are expected to cause a long-awaited rise in the price of memory chips, and ‘analysts are upgrading their memory price estimates’, said Yungsan Choi, analyst at Ebest Investment & Securities, said. The component supplier Murata Manufacturing Co. and chipmaker MediaTek Inc. both expect more than half a billion 5G devices to be shipped this year.
Samsung’s business is showing signs of growth at a time when the de facto leader, billionaire heir Jay Y. Lee, is back in jail after his sentencing on bribery charges. His foundry business and display panel division both posted quarterly records. The company expects robust sales of smartphones, following the launch of its new Galaxy flagship family earlier this year.
The chipmakers Intel Corp and Micron Technology Inc. gave a strong forecast for the first quarter of this year about the continuing demand for computers and telephones that make working and studying at home possible. Taiwan Semiconductor Manufacturing Co. plans another record year of investment, with as much as $ 28 billion available to expand and improve its production capacity in a time of silicon shortages affecting everyone, from global automakers to mobile technology giants like Apple Inc. and Qualcomm Inc.
Samsung’s manufacturing of chip drives is expected to expand with the addition of Intel as a customer. The two companies have been discussing the development and production of Intel’s mainboard chipsets for the past two years, and Samsung will manufacture the chipset at its plant in Austin, Texas from this quarter, Meritz Securities said in a note.
It is said that Samsung will process $ 10 billion Texas Chipmaking Factory
The existing plant in Austin can operate at a process of 14 nanometers. With the growing expectations of growth in the foundry market, Samsung is considering building a leading factory for the production of logic chips that will be able to produce chips as advanced as 3 nm in the future, Bloomberg News reported earlier.
(Updates with details from the income from the second paragraph)
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