Home Business News Samsung reports highest profits in 3 years on surging chip demand

Samsung reports highest profits in 3 years on surging chip demand

Samsung reports highest profits in 3 years on surging chip demand


Samsung Electronics reported its highest quarterly profits in three years and said the global chip crunch would continue into next year, but the results failed to allay concerns about its long-term strategy.

The world’s biggest maker of computer chips, smartphones and electronic displays has benefited from surging demand during the Covid-19 pandemic, but chip prices have come under pressure as workers have begun to return to the office and economies reopen.

Samsung’s net profit jumped 31 per cent to Won12.3tn ($10.4bn) in the July-September quarter as sales increased 10 per cent to a record Won74tn.

The company cautioned that component shortages at some customers may affect demand in the fourth quarter and warned of uncertainties next year due to supply chain disruptions and higher prices for raw materials.

Samsung expects home appliance sales to weaken in 2022 as people are forecast to spend less time at home, but it is optimistic that smartphone sales will increase, after rising last quarter thanks to the popularity of its flagship foldable devices.

Samsung shares were up 0.3 per cent after it announced the results, leaving the stock down 12 per cent this year, with investors concerned about the company’s strategy and on anxieties that the chip cycle could turn.

“We are likely to see stagnant sales of consumer electronics next year, given possible stagflation and unstable energy prices,” said Kim Young-woo, an analyst at SK Securities.

Samsung said it was confident that any slowdown in the chip market was “unlikely to be deep and long”.

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The legal troubles of the group’s leader Lee Jae-yong have also weighed on the company following his release from prison in August after serving 19 months for bribing former president Park Geun-hye.

Lee was also fined Won70m this week for his illegal use of sedatives after he admitted using propofol 41 times over a five-year period.

He is facing a separate trial over alleged financial crimes linked to the 2015 merger of two Samsung units that allegedly helped him to consolidate control of the group. Lee and the company have denied any wrongdoing.

Lee’s prison term was cut short as opinion polls showed that Koreans believed his leadership was needed to drive large-scale investments amid a global battle for semiconductor supremacy.

But Samsung has yet to make a final decision on plans to build a $17bn semiconductor plant in the US and the group’s acquisition drive has stalled since its $8bn purchase of automotive supplier Harman in 2017.

“M&As don’t seem to be their priority at the moment with Lee still being caught up in legal trouble,” said an industry analyst. “Investors remain in the dark over its long-term growth strategies including M&As. The company appears directionless with no clear strategies for new growth drivers.”

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