Samsung fourth-quarter operating profit surges 53% on record sales

Samsung Electronics, the world's biggest mobile phone manufacturer, reported a 53 per cent surge in fourth-quarter operating profit as record sales helped the company rebound despite supply chain disruptions. Operating profit in the three-month period to the end of December rose to 13.87 trillion won ($11.5bn) from the year-earlier period, the company said in a statement on Thursday.

Quarterly revenue soared more than 24 per cent to a record 76.57tn won, from the same period in 2020 in line with expectations. Growth in revenue was driven mainly by the finished product businesses, with a rise in sales of premium smartphones, including foldable phones, as well as TVs and home appliances, the company said.

Full year operating profit jumped 43.4 per cent to 51.63tn won, while revenue rose 18 per cent to a record 279.6tn won, driven by the strength of its semiconductor business.

Despite strong earnings, the stock price of Seoul-based Samsung closed down 2.73 per cent on Thursday. Sales and profitability in both the fourth quarter and the year were driven by Samsung's consumer electronics and components business.

The 8.84tn won operating profit from its semiconductor business accounts for about 64 per cent of its fourth-quarter results. The chips business posted a revenue of 26.01tn won.

For the full-year 2021, the unit contributed almost 57 per cent to the company's operating profit and over a third to revenue, according to consolidated figures from its website.

Samsung is the world’s third-largest chip manufacturer by its $400bn market capitalisation as of Thursday. That makes it bigger than Intel, Qualcomm and Advanced Micro Devices. It trails Taiwan Semiconductor Manufacturing Company and California-based Nvidia, according to CompaniesMarketCap.

The global semiconductor industry, which was plagued by supply challenges in 2021 owing to the Covid-19 pandemic, is poised for a big rebound this year, with sales expected to cross $600bn for the first time driven by “unusually strong” demand for consumer electronics, Allianz subsidiary Euler Hermes said in a report earlier this month.

Worldwide chip sales surged 26 per cent to hit an all-time high of $553bn in 2021, making the wider electronic component industry one of the winners from the pandemic, it added.

The company expects supply to remain tight in 2022, but will focus on improving its process yield to improve supply stability. It aims to exceed market growth by expanding capacity, adjusting prices and adding new customers. In November, it announced plans to build a $17bn semiconductor factory outside of Austin, Texas.

Samsung's mobile unit reported revenue of 28.95tn won and an operating profit of 2.66tn won in the fourth quarter. The segment remained the biggest in the overall business in 2021, contributing almost 40 per cent for the full year. However, the last time its profit topped the semiconductor unit was in the first-quarter of 2021, according to the company's financial reports.

Samsung has also consistently been atop the rankings of the smartphone market. iPhone-maker Apple, however, retook the top spot in the fourth-quarter of 2021, with a market share of 22 per cent against Samsung's 20 per cent, according to preliminary data from research firm Canalys.

The company cautioned that uncertainties remain in 2022 due to the prolonged effects of the Covid-19 pandemic and component shortages likely to persist. It also expects the smartphone market to grow and the wearable market likely to see a double-digit growth. "The company will strive to achieve material growth in 2022 and continue its efforts to enhance profitability with an improved product mix and operational efficiency," it added.

Samsung’s results come in the run-up to the company's first major event for 2022, Galaxy Unpacked, which will be held on February 9, when it reveals its new Galaxy S22 line-up.