Samsung 2022 game plan calls for more 5G phones and memory chips to be made and sold
According to Reuters, Samsung said on Thursday that it will produce more 5G compatible phones this year to help it grab a bigger share of the smartphone market. At the same time, it sees a pricing rebound for its flagship memory chips as soon as the first half of 2022. The company had its best fourth quarter in four years in terms of profit and expects a recovery in global demand for tech devices.
Samsung is the global leader in smartphone and memory chip shipments
The manufacturer, which is the global leader in deliveries of smartphones and memory chips, does have some concerns about supply chain problems and the pandemic. This year, next-generation 5G phones are expected to make up more than 50% of all smartphone sales. Kim Sung-koo, Vice President of mobile business at Samsung, told an investor briefing that "Our strategy in the mass tier is to actively capture demand from people seeking to replace their phones with 5G models," adding that the company wants to build more "global mega-hit models."
The Samsung Galaxy S22 Ultra will be unveiled February 9th
Of course, what company wouldn't want to build more "mega-hit" handsets. Analysts said that if Sammy follows through on this, it will be staking its 20% share of the global smartphone market against low-cost challengers from China such as Xiaomi, Oppo, and Vivo in markets outside of China.
As for its memory chip business, Samsung sees more demand leading to higher prices for DRAM chips used in data centers and tech devices. "We expect strong fundamental demand centering around servers, and solid mobile demand from expansion of 5G models," said Han Jin-man, Executive VP of the memory chip business. He stated "Some organizations have forecast DRAM prices could reverse in the first half. We think this is a possible scenario."
90% of Samsung's 2021 annual capital expenditure of $40.1 billion was spent on building and improving its chip business. Samsung is the second-largest contract foundry after TSMC which means that chip designers like Qualcomm, which have no fabrication facilities, pay Samsung to manufacture their chips using the designs they give to them. Currently, Samsung Foundry builds Qualcomm's top-of-the-line Snapdragon 8 Gen 1 chipset as well as MediaTek's Dimensity 9000 flagship chipset, and Samsung's own Exynos 2200 chipset.
DRAM prices declined 9.5% during the fourth quarter
A turnaround in DRAM pricing is important to Samsung considering that the memory chips saw their pricing decline 9.5% in the fourth quarter year-over-year. Prices are expected to decline even more during the current quarter. Supplies of non-memory chips should remain tight thanks to the current chip shortage, demand for 5G capable handsets, demand for chips to restock inventory, and increased outsourcing by fabless chip design firms.
Samsung's fourth-quarter operating profit rose 53% to the equivalent of $11.6 billion. Its largest business segment, chips, saw profits more than double from the year-earlier to the equivalent of $7.33 billion. Despite such strong results, the numbers failed to meet market expectations thanks to higher R&D and one-off year-end bonuses. Net profit rose 64% to $8.93 billion. Revenue rose 24% to a record $63.30 billion.
Operating profit at Samsung's mobile business rose about 9.9% year-over-year to $2.20 billion in the fourth quarter. Looking to push for "profits over volume," Samsung said it failed to meet its initial guidance for memory chip shipments after deciding not to be aggressive in shipping chips. Samsung shares fell 2.5% in afternoon trade on Thursday, compared with the wider market's 3.2% drop.
Park Sung-soon, an analyst at Cape Investment & Securities, said, "Samsung seems to have considered its low inventory of memory chips, lack of clean room space to expand production in 2022, the dip in memory chip prices last quarter, and decided not to sell as much. This lean toward profitability over volume could continue in the first and second quarters, depending on market conditions."
Samsung will unveil the Samsung Galaxy S22 series on Wednesday, February 9th. The top-of-the-line Galaxy S22 Ultra will replace the Galaxy Note with its squared-off corners, the included S Pen, and housing for the digital writing instrument. Analysts expect the new models to hike mobile shipments.
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