Samsung Delivers Strong Q2 Profit Gains As Chip Shortage Hits OLED Smartphones and TVs

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Heavy demand for memory chips helped Samsung Electronics deliver stellar second-quarter results, though a global chip shortage could complicate things further down the road.

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The South Korean electronics giant said it posted a 53% year-over-year profit gain for the quarter, Nikkei Asia reported on Wednesday. Its Q2 revenue grew 19% from the previous year. Both figures beat consensus analyst estimates.

Samsung won’t offer any further details until it releases full earnings data later this month. But analysts say the company’s semiconductor division likely drove the Q2 gains, thanks to rising chip prices caused by a shortage of supply. According to estimates from Japanese financial firm Nomura, DRAM prices during the second quarter might have risen more than 20% from the prior year.

In a report before Samsung’s guidance, Nomura analyst CW Chung said Samsung could continue to benefit from the continuing need for companies to procure chips.

The wild card is how long the company can keep up with the demand that is already straining its manufacturing capacity.

As the Financial Times reported Tuesday, the global chip shortage comes just as smartphones are delivering sharper images to consumers thanks to next-generation screens that use organic LED (OLED) technology rather than liquid crystal displays. Screens that use OLED are thinner, offer sharper colors and higher resolution, and also require less energy. Nearly half of current smartphones use these displays, as do most high-end TVs.

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But OLED requires specialized chips – and those chips are in very short supply right now. Until a few years ago the chips were only used in Samsung phones, which means Samsung was also the dominant supplier of the chips. It was later joined by Taiwan Semiconductor Manufacturing Company (TSMC).

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But the market has since expanded considerably. Nowadays both companies are overwhelmed with orders for specialized chips from automakers, smartphone manufacturers and server manufacturers. Sales volume hit 100 billion chips in April.

Even lower-end chips are in short supply.

The shortage is not just about high-end chips anymore,” Nomura’s Chung told FT. “The shortfall now affects chips of all sizes and levels of sophistication, including chips critical for OLED display production.”

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