South Korea’s biggest stock, Samsung Electronics, has pleased investors after revealing its first-quarter operating profit is likely to have surged by around 44%.
The tech giant’s Q1 2021 preliminary results showed the early release and price reduction of the Galaxy S21 smartphone appears to have paid off.
“For Samsung, I think it’s been a good quarter, the Galaxy S21 series seems to have done well this quarter, its (sales of the smartphone) rebounded after slow sales in the previous quarter and if you look one year back the Galaxy S20 series launched at a time when the pandemic had just started to hit the global markets. So that was not a very fortunate time for Samsung, but it seems to have rebounded,” IDC Asia Pacific Senior Research Manager, Kiranjeet Kar told Bloomberg.
“I think another big factor at play is also they have lowered the price of the S21 series compared to the previous generation so that seems to have gone well with the consumers in the market.”
The Q1 preliminary results were in line with analysts’ expectations with revenue increasing 17% on the previous corresponding period.
The strong results came despite an unexpected shutdown at the company’s semiconductor manufacturing foundry in Austin,Texas. The problems came at the worst possible time, as tech giants battle a global semiconductor shortage.
Samsung’s semiconductor manufacturing business not only makes chips for its own products but also supplies other companies. Its share of the global contract semiconductor manufacturing market is around 17% with clients including Nvidia, IBM and Qualcomm.
“The good thing is that there is very strong demand for chips across the board from different industries, not just from smartphones or PCs but also servers and automotive… which means all the foundries are running at full capacity,” said Ms Kar
“But the downside is there is very little scope to absorb any disruption, so for example for Samsung, the shutdown for a few weeks at its Austin plant – it would increase the lead time for some of the components… they could cause a bottleneck and delay the unit production of the entire device.”
Samsung shares (KRX:005930) were steady following the preliminary results release, however over the past 12 months the stock price is up around 70%.