Samsung’s stock underlines cloudy outlook despite record Q1

Shares of Samsung Electronics Co. fell to a fresh 52-week low on Thursday despite posting record sales for the third consecutive quarter as investors questioned the tech giant’s business outlook amid the top leadership vacuum.

Samsung, the world’s largest memory and smartphone maker, said its first-quarter revenue increased 19% on-year to an all-time high of 77.78 trillion won ($61.24 billion), driven by brisk sales of memory chips and smartphones.

Operating profit rose 50.5% from a year ago to 14.12 trillion won, the company’s second-best quarterly performance.

Net profit jumped 58.6% to 11.3 trillion won, the company said in a regulatory filing.

The final first-quarter results came largely in line with the company’s preliminary figures released earlier this month.

Despite its spectacular quarterly results, however, Samsung’s stock closed down 0.3% at 64,800 won on Thursday, posting its worst performance in 52 weeks. The broader Kospi market rose 1.1% to finish at 2,667.49.

“The murky business outlook in the market where Samsung is leading the pack, coupled with unresolved risks linked to the company’s leader Lee Jae-yong, keeps depressing the company’s stock,” said an industry executive. “Samsung needs to address the market concerns once and for all if it wants to regain investors’ confidence.”

CHIP SALES LEAD TO STRONG Q1 PERFORMANCE

In the January-March period, Samsung's memory business logged 26.87 trillion won in revenue – record quarterly sales. The sector earned 8.45 trillion won in operating profit, nearly 60% of the company’s entire operating gains.

Memory chip prices declined less than previously expected thanks to solid chip demand from servers and PCs, Samsung said.

Its foundry, or contract chip manufacturing, business achieved its highest first-quarter sales on solid demand from various applications and improved yields of its advanced process technology.

"If you look at our order book for the next five years, the total is worth eight times our last year’s foundry revenue,” said Kang Moon-soo, senior vice president and head of Samsung's foundry market and strategy team, at a conference call with analysts.

Regarding media reports that foundry clients such as Qualcomm Technologies Inc. and Nvidia Corp. are switching from Samsung to bigger rival and market leader Taiwan Semiconductor Manufacturing Co. (TSMC), Kang said market concerns over the issue are “excessive.”

“We’re maintaining solid relationships with our clients. We expect orders to increase given our advanced process technology,” he said.

Samsung said it will solidify its foundry technology leadership with the world’s first mass production of the 3-nanometer GAA process.

UNCERTAINTIES TO PERSIST IN Q2

Samsung’s DX (Device eXperience) division, which sells smartphones, TVs and home appliances, posted sales of 48.07 trillion won in the first quarter, its highest revenue since 2013, with 4.56 trillion won in operating profit.

Its smartphone business saw growth in terms of both sales and profitability thanks to the successful launch in late February of its latest flagship Galaxy S22 series, Samsung said.

The company said it expects macroeconomic uncertainties, logistics disruptions and geopolitical risks to persist in the second quarter.

The foundry supply shortage will continue in the coming months, while smartphone market demand is forecast to slightly decline in the second quarter from the previous quarter, it said.

TOP LEADER AWAY FROM MANAGEMENT

Analysts said one of the biggest risks facing Samsung is the absence of Vice Chairman Lee Jae-yong, better known by his English name Jay Y. Lee, from management.

Lee, the key decision-maker of the Korean tech giant’s long-term strategy, has been on parole since August 2021 after serving 18 months of his 30-month prison term for a bribery and embezzlement conviction.

But Lee’s parole, instead of a pardon, means he will be unable to return to Samsung management until the second half of 2027, under the current law governing economic crimes.

The sustained leadership vacuum has kept Samsung from making decisions on key future investment plans, according to industry officials.

Korea’s business lobby groups have asked President-elect Yoon Seok-yeol, who takes office in early May, to pardon Lee, the de facto leader of the nation’s top conglomerate Samsung Group, for the sake of the local semiconductor industry.

On Thursday, foreign investors sold a net 3.28 trillion won worth of Samsung Electronics shares partly on concerns over the leadership risk, industry officials said.

Write to Ji-Eun Jeong at jeong@hankyung.com
In-Soo Nam edited this article.