Samsung warns supply chain disruptions could affect chip demand and profit to three-year high

Seoul: Samsung Electronics Co. Ltd. said on Thursday that it expects component shortages to affect some customers’ demand for chips in the last three months of the year, after reporting its highest quarterly profit in three years.

The warning comes as producers of goods, from televisions to cars, have faced a host of supply chain issues ranging from a shortage of parts to logic chips, labor shortages, logistical grunts and delays at parts factories due to power outages in China.

“A longer-than-expected component supply issue may need to be watched” for a potential impact on devices that use memory chips, Samsung said, although it added there was “a strong basic demand “for server chips.

“There are a lot of uncertainties due to various macroeconomic issues, including the effect of ‘return to normal’, component supply and rising raw material prices,” said Han Jin-man, vice-president. executive chairman of the memory activity.

“But … the component supply problems seem to stem more from inadequacies in the management of the supply chain than from an absolute lack of supply … The situation could therefore improve from the second. semester of next year. ”

Samsung said demand for server DRAM chips, which temporarily store data, and NAND flash chips, which serve the data storage market, is expected to remain strong in the fourth quarter due to expanding investment in data centers. data, while growth in personal computer manufacturing is expected to be sustained. in line with the previous quarter.

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While supply chain issues may limit some customers’ demand for mobile chips in the fourth quarter, demand for server and personal computer chips is expected to be robust in 2022 despite the uncertainties, he said.

Samsung said the drop in memory chip prices was not a big cause for concern, as chips are now used in a wider variety of devices than personal computers, making price fluctuations more cyclical. weak and shorter than in the past. Chipmakers also had reduced inventory levels, leaving room for buildup without having to sell at low prices.

Falling memoir prices weighed on the company’s shares, with investors expecting prices to peak in the third quarter before falling until mid-2022.

“There appears to be a clear gap in the memory price outlook between chipmakers and the market. Companies are expressing a strong will not to sell chips at low prices,” said Park Sung-soon, analyst at Cape Investment & Securities.

“However, even the demand for server chips is not guaranteed at this point, as component supply issues affect them as well.”

Analysts expect Samsung’s fourth-quarter earnings to be at or below third-quarter earnings, largely based on memory chip prices.

Smaller rival SK Hynix struck a more bullish note than its US peers on Tuesday and forecasts steady demand for memory chips. Earlier, chipmakers Intel and Micron had said that shortages of certain components were preventing their customers from shipping PCs.

Higher for three years

World’s Leading Memory Chip and Smartphone Maker Sees 28% Increase in Operating Profit in July-September Quarter to 15.8 trillion won ($ 13.48 billion) on higher profits by 82% year-on-year in its chip business, where profits rose to 10.1 trillion won.

Rising memory chip prices, along with a jump in profitability from Samsung’s contract chip manufacturing business, boosted operating profit for the chip business.

Samsung’s mobile division operating profit fell about 24% year-on-year to 3.36.6 trillion won in the third quarter, as sales of Samsung’s new foldable smartphones were tempered by marketing costs.

Net profit rose 31% to 12.3 trillion won. Revenue rose 10 percent to a record 74 trillion won.

Samsung shares rose 0.3% in Thursday afternoon trading, compared to a 0.2% rise in the broad market. Its shares have fallen about 13% since the start of the year.

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