Samsung bolstered by demand for data centre doodads, but could be derailed by supply chain issues

Pandemic work patterns work in component-maker's favour, but COVID isn't all upside

Samsung Electronics sees ongoing high demand for data centre products, but the firm is also worried that supply chain constraints could see sales slip, execs revealed in an earnings call on Thursday.

Investors on Samsung's Q3 FY21 call were told one factor impacting demand is that pre-pandemic work patterns are not returning – meaning more digital transformation projects to facilitate remote services and therefore more demand for servers and data centres.

Samsung's Q4 memory outlook was described as follows [PDF]:

Fundamental demand for servers to stay strong thanks to increase in data centre investments, but need to check effects of prolonged component supply issues on demand.

Samsung execs told investors they see "a lot of uncertainty around back to normal and component and supply chain issues". Raw material prices are also rising, meaning all of the Korean giant's products are impacted. Efforts to improve supply have not necessarily been targeted where they are most needed, at least from Samsung's point of view.

"We think it's not an issue of absolute shortage, but rather a mismatch of supply chain," investors were told. Execs also expressed the opinion that if the world were experiencing a blanket supply shortage, things would improve sooner.

Execs set the second half of 2022 as the time Samsung feels the situation may ease.

Despite supply constraints, Samsung's mobile segment grew quarter-on-quarter by 28 per cent, which Samsung chalks up to alleviating effects of COVID-19 along with increased sales of foldables and other high-end products. One exec on the call said the company had succeeded in its efforts to mainstream foldables into the market.

Semiconductor sales stayed strong, jumping 16 per cent quarter-on-quarter due to server demand, and the DRAM market remained competitive following introduction of the 15nm product. Samsung's foundry also saw an increase in customers globally and the company reiterated its plan to triple its chipmaking capacity.

Overall, the company had a 16 per cent quarter-on-quarter and 10 per cent year-on-year increase in revenue, to ₩73.98tn (US$63.13bn). Gross profit hit ₩31.08tn (US$26.52bn) – a 16.8 per cent increase quarter-on-quarter and 15.15 per cent jump year-on-year. Net profit was up 31.3 per cent year-on-year to ₩12.29tn (US$10.49bn). ®

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