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Samsung profit likely biggest in six quarters on higher chip prices

FILE PHOTO: Samsung Electronic's HQ in Suwon, South Korea

By Joyce Lee

SEOUL (Reuters) - Samsung Electronics is expected to post a near nine-fold increase in first-quarter profit from a year earlier as rebounding semiconductor prices lift earnings from a low base caused by a severe chip downturn.

Operating profit for the world's biggest maker of memory chips and TVs likely rose to 5.7 trillion won ($4.24 billion) in the quarter ended March 31, according to the average of an LSEG SmartEstimate from 27 analysts, weighted toward those who are more consistently accurate.

If so, it would be Samsung's highest profit since the third quarter of 2022. It compares with an operating profit of 640 billion won in the first quarter last year.

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This is because its chip division, traditionally its biggest earner, is expected to report its first quarterly profit in five quarters of about 750 billion won, according to an average estimate from 12 analysts.

Memory chip prices have rebounded from a deep trough that began mid-2022 due to weak post-pandemic demand for gadgets that use the chips.

During the first quarter, memory chip prices jumped by about 20% versus the previous quarter for DRAM chips used in tech devices and 23% to 28% for NAND Flash chips used for data storage, according to data provider TrendForce.

The bullish outlook for memory chip demand, including exploding appetite for chips such as high-bandwidth memory (HBM) used in artificial intelligence chipsets, has driven a 29% rise in Samsung shares over the last 12 months.

Samsung's chip design and chip contract manufacturing businesses are still loss-making, analysts said. But memory chipmakers have limited supply of lower-margin chips since the downturn, while buyers are restocking inventory, improving the tech giant's profits.

Meanwhile, its mobile business likely reported an operating profit of around 3.8 trillion won, according to an average of forecasts from 12 analysts, slightly below the unit's 3.94 trillion won profit a year ago.

Samsung began selling its latest flagship Galaxy S24 smartphones at the end of January, with a bevy of AI functions to compete with rival Apple at the top end of the market.

This led Samsung to ship an estimated 57 million smartphones during the first quarter, up 8% from the previous quarter according to Eugene Investment & Securities.

The average selling price of Samsung smartphones also likely rose 30% to $340 quarter-on-quarter, supporting profits, Eugene said.

The tech giant will announce its preliminary first-quarter earnings results on Friday before reporting full figures later this month.

($1 = 1,345.6000 won)

(Reporting by Joyce Lee; Editing by Jamie Freed)