Samsung's Q1 profit seen at $13.7 bln as DRAM chip margins soar

Samsung Electro-Mechanics

04/04/2018 24:00

* Samsung to issue Q1 earnings guidance on April 6
    * Thomson Reuters survey tips 14.5 trln won Q1 profit, up 46
pct
    * Chip business likely to report 10.7 trln won profit

    By Joyce Lee
    SEOUL, April 4 (Reuters) - Samsung Electronics Co Ltd
 005930.KS  is set to forecast a near 50 percent jump in
quarterly profit on Friday as an unprecedented rally in the
global memory chip market should outweigh a slowdown in
smartphones and related components sales.
    Earnings from its bread-and-butter semiconductor business
will amount to almost three quarters of its entire operating
profit of $13.7 billion, as analysts estimated Samsung would
book about 70 cents in operating profit for every $1 of DRAM
chips sold. 
    Disciplined supply will mean the global memory chip market
will remain tight throughout this year and help Samsung report
record earnings, although profit growth is seen slowing to just
15 percent from last year's blistering 83 percent.
    "Although memory chip price growth is expected to slow down
from last year's boom, increased shipments and cost-cutting will
fuel further profit growth in Samsung's semiconductor business
and lift profits to another record year," said Lee Jae-yun, an
analyst at Yuanta Securities Korea. 
    The world's largest semiconductor and smartphone maker is
expected to forecast a 46 percent jump in operating profit in
the January-March period to 14.5 trillion won ($13.7 billion),
according to a Thomson Reuters survey of 17 analysts. 
    This compares to an operating profit of 9.9 trillion won in
the same period last year, but is lower than the record
quarterly profit of 15.15 trillion won in the previous quarter. 
    The company will issue earnings guidance on Friday ahead of
full details on its performance later in April.
    Its chip business is likely to report about 10.7 trillion
won in operating profit, as strong DRAM demand is seen
offsetting falling prices in NAND chips, analysts said. 
    Lower-than-expected iPhone X sales made Apple Inc  AAPL.O 
cut its OLED panels purchase for 2018 to only 60-65 percent of
the original purchase plan, which led to a decrease in Samsung's
OLED panel shipments forecast, according to Julian Lee, an
analyst at research provider WitsView. 
    Samsung is widely known as the exclusive supplier of organic
light-emitting diode (OLED) screens for the high-end smartphone.
   
    As for the mobile business which accounts for about 40
percent of the South Korean firm's revenue, Samsung shipped 9.3
million Galaxy S9 series smartphones globally during the
quarter, according to estimates by Strategy Analytics. 
    Analysts said early market reception appeared favorable,
with sales seen similar to last year's S8. 
    The S9, which went on sale in most markets in mid-March, is
likely to have a considerable on-year impact on first quarter
profit as it was released a full 5 weeks earlier in 2018 than
the S8 in 2017.  urn:newsml:reuters.com:*:nL4N1QF0I7 
    Shares in Samsung Electronics are down about 7 percent so
far this year after hitting a record 2.876 million won in
November, due to concerns about the sluggish smartphone market
and worries about a subsequent fall in component demand.
 urn:newsml:reuters.com:*:nL3N1R50UI 
    Trading in its shares will be halted between April 30 and
May 3 for a planned 50:1 stock split, which could lift market
capitalisation on better retail investors' access to the stock,
analysts said.  urn:newsml:reuters.com:*:nS6N1P5025 
($1 = 1,056.5800 won)

 (Reporting by Joyce Lee; Editing by Miyoung Kim and Stephen
Coates)
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net))