SEOUL (BLOOMBERG) - Samsung Electronics' profit missed analysts' estimates and the company warned of weaker first-quarter results as smartphone competition intensified and memory prices remained weak.
South Korea's biggest company reported net income in the three months ended December of 6.45 trillion won (S$7.7 billion), missing the 7.3 trillion won average of estimates compiled by Bloomberg. Samsung also announced it'll increase its annual dividend payout to 9.8 trillion won and continue to return 50 per cent of free cash flow to shareholders between 2021 and 2023, maintaining its previous shareholder return program.
The company disclosed preliminary numbers earlier this month that showed operating profit rose by 26 per cent. Shares fell as much as 2.8 per cent in Seoul on Thursday (Jan 28).
Coming off a strong third quarter of mobile sales, the world's largest smartphone maker struggled in the holiday period as Apple introduced its first 5G-capable iPhones and Chinese rivals put up fierce competition. Memory chip prices were weak during the period, though demand is starting to gradually improve and Samsung expects a recovery in the first half of the year.
A strong won and costs associated with new production lines weighed on its semiconductor business, the company said. Operating profit for the semiconductor unit was 3.85 trillion won, short of the 4.62 trillion estimate from analysts.
Demand for more powerful 5G smartphones along with server inventory buildup is expected to drive a long-awaited rebound in memory chip prices and "analysts are busy upgrading their memory price estimates," said Yungsan Choi, analyst at Ebest Investment & Securities. Component supplier Murata Manufacturing and chipmaker MediaTek both anticipate more than half a billion 5G handsets to be shipped this year.
Samsung's business is showing signs of growth at a time when its de-facto leader, billionaire heir Jay Y. Lee, is back in prison following his sentencing on bribery charges. Its foundry business, which fabricates chips for others, and display panel division both posted quarterly records. The company anticipates "robust" sales of smartphones, having launched its new Galaxy flagship handset family earlier than usual this year.
Chipmakers Intel and Micron Technology gave a bullish forecast for the first quarter of this year on continued demand for computers and phones that enable working and studying from home. Taiwan Semiconductor Manufacturing Co is planning another record-breaking year of investment with as much as US$28 billion (S$37.3 billion) set aside to expand and improve its production capacity at a time of silicon supply shortages affecting everyone from global automakers to mobile tech giants like Apple and Qualcomm.
Samsung's foundry business is expected to expand with the addition of Intel as a customer. The two companies have discussed development and production of Intel's mainboard chipsets over the last two years and Samsung will produce the chipset at its Austin, Texas plant starting from this quarter, Meritz Securities said in a note.
The existing Austin fab is capable of operating on a 14-nanometer process. With rising expectations of growth in the foundry market, Samsung is considering building a cutting-edge logic chipmaking plant in the region that would be capable of fabricating chips as advanced as 3nm in the future, Bloomberg News reported earlier.