Samsung Elec aims to grow phones in 2022, Reuters sees strong chip demand

Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics Co. Ltd said it wants to gain more market share in the phone this year with more 5G-capable models, and in the first half indicated a possible rebound in the price of its flagship memory chips.

The world’s largest memory chip and phone maker predicted a rebound in demand for technology devices on Thursday after announcing its best fourth-quarter earnings in four years, despite warnings about supply chain problems and the ongoing challenges of COVID-19.

Next-generation 5G smartphones will account for more than half of market phone sales in 2022, said Kim Sung-koo, vice president of mobile business, in an information briefing for investors.

“Our strategy is to actively capture the demand of people who want to replace smartphones with 5G models at the mass level,” Kim said, adding that the company will look for more “global mega-hit models”.

Analysts say that Samsung (KS :), which accounts for Xiaomi (OTC :), which accounts for about 20% of the global smartphone market, would compete with low-cost Chinese smartphones like OPPO and Vivo in overseas markets.

The South Korean tech giant was also cautious with the possibility of reversing the price of DRAM chips, which are widely used in data centers and technology devices.

“We expect strong core demand around servers, and strong mobile demand from the deployment of 5G models,” said Han Jin-man, VP Executive of the memory chip business.

“Some organizations anticipate that DRAM prices may fall in the first half of the year. We believe this is a possible scenario,” he added, although supply problems, raw material costs and geopolitical risks remain an unknown variable.

The price of DRAM chips fell 9.5% in the fourth quarter from the previous quarter, according to TrendForce data, and analysts expect a further decline in the current quarter. Views are mixed when it comes to bouncing.

For non-memory chips, Samsung said tight supply was expected due to increased utilization of 5G-capable devices, demand for high-performance computing, increased outsourcing of chip design and manufacturing, and continued demand for inventory.

The company spent 90% of its $ 20.2 trillion ($ 40.1 billion) capital expenditure in 2021 on the chip business, but declined to provide guidelines for 2022.

CHIP DECISIONS

Samsung reported a 53.9 trillion ($ 11.6 trillion) increase in fourth-quarter earnings growth in the fourth quarter. Its chip business profits, its largest division, more than doubled from a quarter of the same quarter a year ago to 8.84 trillion.

However, analysts said earnings were lower than expected by the market due to conservative memory chip shipments, R&D costs and timely end-of-year bonuses.

Samsung said it had fallen short of initial guidelines for memory chip shipments after deciding not to push sales in an aggressive manner, indicating a push to prioritize profits over volume.

“Samsung seems to have taken into account its low memory chip inventory, lack of clean room space to expand production in 2022, and a drop in memory chip prices in the last quarter, and decided not to sell that much,” said Park Sung-soon, an analyst. Cape Investment and Securities.

“This trend in volume profitability may continue in the first and second quarters, depending on market conditions.”

Samsung said it is still looking at mergers and acquisitions.

“We need to maintain our ability to invest in non-organic growth options,” said Ben Suh, Samsung’s Executive VP, when asked about investor returns.

Samsung’s mobile business operating profit grew by about 9.9% year-on-year to 2.66 trillion in the fourth quarter.

On Wednesday, Samsung said it will unveil its latest flagship phone model on Feb. 9, which analysts expect to lift mobile shipments.

Net income rose 64% to 10.8 trillion. Revenue rose 24% to a record 76.6 trillion profit.

Shares of Samsung fell 2.5% in Thursday afternoon trading compared to a 3.2% drop in the broader market.

($ 1 = $ 1,202,800)