Samsung believes its profits rose 44% despite supply problems

Hong Kong (CNN Business) — Samsung hopes to have had a strong first quarter, even when one of its chip manufacturing facilities was temporarily shut down by a brutal winter storm in the United States in early 2021.

The South Korean conglomerate said on Wednesday that it likely made about 9.3 trillion Korean won (US $ 8.3 billion) in operating profit from January to March, marking a 44% jump compared to the same period last year.

It also expected sales to increase 17% year-on-year, to roughly 65 trillion Korean won ($ 58.2 billion). Preliminary results were roughly in line with estimates predicted by analysts surveyed by data provider Refinitiv.

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Samsung Profited Despite Troubles

Samsung’s semiconductor plant in Austin, Texas, was forced to shut down in February after the state was hit by widespread power outages related to a colossal winter storm, but “reached production close to normal levels late. March “, according to a statement from the company.

Analysts estimate that the outage cost Samsung about 400 billion Korean won ($ 358 million). That’s assuming 100,000 semiconductor boards “were scrapped,” according to Jae-yun Lee, an analyst at Yuanta Securities.

The suspension came at a particularly unfortunate time: The global chip industry has been grappling with a supply shortage for months, and many vendors failed to keep up with demand.

Last month, Samsung Co-CEO Koh Dong-jin told investors that the tech giant was having problems with its supply chain. The company was struggling to address the semiconductor shortage and could continue to face problems in the second quarter, he added.

But as the situation in Austin continues to improve, the recovery in production “should start to drive earnings growth” from Samsung’s chip division, Nomura analyst CW Chung wrote in a note to clients, on Wednesday.

Nomura analysts also expect a rise in the prices of certain semiconductor components in the second quarter, which they believe could help boost the company’s results in the coming months.

Samsung smartphones are expected to shine too. The company launched its new Galaxy S21 devices in January 2021, earlier than usual, and its “momentum” in the space “should stand out,” Lee wrote in a recent research note previewing Q1 performance.

Samsung did not break down its earnings in its preliminary release. The company will report full results later this month.

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