Samsung Electronics Announces Fourth Quarter and FY 2021 Results

Record quarterly revenue of KRW 76.57 trillion, operating profit at KRW 13.87 trillion
Consumer electronics to focus on maintaining solid profitability

Samsung Electronics today reported financial results for the fourth quarter and the fiscal year 2021.

The Company posted KRW 76.57 trillion in consolidated revenue, a quarterly record and KRW 13.87 trillion in operating profit in the quarter ended December 31, 2021. For the full year, it reported KRW 279.6 trillion in revenue, a new historic high and KRW 51.63 trillion in operating profit.

The fourth quarter revenue growth was driven mainly by the finished product businesses, with expanded sales of premium smartphones, including foldable phones, as well as TVs and home appliances. Operating profit declined from the previous quarter due to a special bonus payment to employees, but rose from a year earlier, driven by the semiconductor businesses.

Earnings at the Memory Business decreased from the prior quarter as prices fell to a certain extent and bit growth came in below the Company’s guidance. The Foundry Business posted a new record for quarterly revenue, while profitability decreased slightly from the previous quarter due to a rise in costs related to ramping up advanced process nodes.

The Display Panel Business saw earnings continue to improve for mobile panels, while losses in large panels widened due to price declines in LCDs and costs related to QD displays.

Revenue of the Mobile eXperience (MX) Business increased slightly led by sales of premium products such as foldable phones and Device Ecosystem products, while profit declined quarter-on-quarter as marketing expenses increased. The Networks Business results improved from the prior quarter as revenue grew for both domestic and global businesses.

The CE businesses posted record quarterly revenue due to robust sales of premium products, but profit declined slightly quarter-on-quarter amid rising costs.

The strength in the US dollar against the Korean won offset the weakness in major emerging currencies, leading to a positive impact of approximately KRW 300 billion on operating profit compared to the previous quarter.

In the first quarter, the Memory Business will focus on maximizing the quality of the business portfolio via higher sales of advanced node products to support the server and PC demand recovery, although lingering uncertainties are likely to persist. The System LSI Business will look to supply essential SoCs and CISs for key customers’ flagship products, while the Foundry Business will seek to expand supply by improving production and yield at advanced processes.

In the Display Panel Business, mobile displays is expected to deliver improved results year-on-year, driven by new smartphone releases and an expansion of the foldable display customer base. In large panels, losses are likely to be partially mitigated with the mass production of QD displays.

The MX Business is expected to deliver revenue and profit growth despite supply constraints, led by new flagship model releases and higher sales of mass market 5G smartphones as well as tablets and wearables. For the Networks Business, the Company aims to win new opportunities from European and other global customers.

The Visual Display and Digital Appliances businesses will seek to improve profitability by focusing on sales of premium products and expansion of new-category products and the portion of online sales.

In 2022, amid expectations of a recovery in global IT demand, the Company’s component businesses will increase production of advanced processes and enhance leadership in next-generation products and technology. In the finished product businesses, the Company will strengthen the premium segment lineup and create new user experiences by enhancing connectivity and synergies between devices. However, challenges associated with supply issues and COVID-19 are likely to persist.

In the Memory Business, demand is expected to grow as enterprises ramp up IT investments while the Company will expand supply of high-performance products and increase application of industry-leading EUV technology to solidify the cost competitiveness and market leadership. The System LSI Business will reinforce the lineup of SoCs and the Foundry Business aims to outpace market growth by extending technology leadership with mass production of the 1st generation GAA process.

For the Display Panel Business, demand for OLED is expected to increase with the higher penetration of 5G and growth of the foldable market. For large panels, the Company will work to secure technology leadership in the premium segment with QD displays while closing the LCD production line as planned.

The MX Business aims to increase market share by focusing on innovations in flagship products and providing a differentiated user experience. The Company will also expand sales of Device Ecosystem products by enhancing the value delivered to customers. For the Networks Business, the Company will focus on capturing demand for 5G networks and winning new global customers.

For Visual Display and Digital Appliances, the Company will further solidify market leadership and seek growth by continuing to expand sales of premium products, such as Neo QLED and Bespoke, and also by strengthening sales of Lifestyle TVs and new home appliance products.

The Company’s capital expenditures in 2021 reached a total of KRW 48.2 trillion, including KRW 43.6 trillion for semiconductors and KRW 2.6 trillion for displays. Spending on memory was concentrated on capacity expansions and process migrations at fabs in Pyeongtaek and Xi’an to address demand for advanced nodes, including EUV-based 15-nanometer DRAM and 6th generation V-NAND. Foundry expenditures were focused on capacity expansions for 5-nanometer EUV nodes. For displays, investments were centered on mobile modules and QD displays.

Semiconductor led by Server Sales; Foundry posted Highest-Ever Revenue
The semiconductor businesses posted KRW 26.01 trillion in consolidated revenue and KRW 8.84 trillion in operating profit in the fourth quarter.

Overall demand in the Memory Business, centered on server, was solid but earnings declined quarter-on-quarter due to a continuation of global supply chain issues and a slight drop in ASP. Considering the inventory levels and the market outlook, Samsung refrained from pushing aggressively to expand sales and, as a result, came in below initial bit growth guidance. However, the Company continued to strengthen competitiveness by increasing its cutting-edge portion of processes.

For DRAM, impacts on set production from global supply chain issues were felt throughout all applications, while server demand remained strong thanks to an increase in DRAM content-per-box on increased adoption of high-core CPUs. Graphics cards shortage in supply remained due to the strong demand for gaming PCs, along with rising demand for crypto mining. Based on preemptive product-mix adjustments, Samsung actively addressed an increase in server and graphic demand.

For NAND, demand for server SSD from major data center customers was robust, but there were some market effects related to disruptions in the IC component supply chain. Demand for client SSD was somewhat stagnant because of inventory adjustment by some customers and manufacturing disruptions caused by component shortage. Samsung focused on optimizing sales considering various factors including its inventory situation, while identifying impacts on production caused by changes in line operation due to the lockdown in Xi’an.

Looking to the first quarter, while risks, such as the spread of a COVID variant, need to be monitored, the Memory Business will concentrate on enhancing the balance of its portfolio, including through increased sales of cutting-edge, high-value products to support the server/PC demand and also by actively addressing demand from all applications.

For DRAM, server demand remains strong thanks to the high density trend alongside increased investments centering on data centers, while the high-core CPU portion continues to increase. Mobile demand is solid as major manufacturers launch products based on new form factors and increase the portion of LPDDR5.

For NAND, server SSD demand is expected to be robust thanks to continuing investments, mainly in data centers. PC demand will recover, mainly for laptops, along with gradual improvements in component shortage. And for mobile, despite being amid slow seasonality, Samsung expects the high-density trend for storage to persist as manufacturers launch new 5G models.

In 2022, the Memory Business expects server demand to grow, attributed to increase in IT investments and new high-core CPUs, while 5G lineup expansion is likely to increase content-per-box for mobile, although challenges related to supply issues and COVID-19 are likely to persist. Therefore, the Company will continue to reinforce its leadership by expanding supply of high-performance products and increasing application of its industry-leading EUV technology.

The System LSI Business reached the highest-ever quarterly sales thanks to increased demand for SoCs, DDIs, and PMICs, but profit fell slightly due to the influence of special bonuses. In the fourth quarter, the Company began supplying the 4-nanometer AMD GPU-powered SoC and expanded adoption for the 108-megapixel image sensors from customers.

In the first quarter, demand is expected to stay strong for OLED DDI, NFC/eSE, and PMIC products. Samsung plans to expand supply of GPU and NPU improved SoCs and ultra-high resolution image sensors.

In 2022, the System LSI Business hopes to see its performance grow further by maximizing supply of 5G SoCs for the volume zone and 108- and 200-megapixel sensors.

The Foundry Business set a new revenue high for the fourth quarter as it increased sales for large scale HPC customers and secured new orders in HPC application. In addition, the Company confirmed US Taylor and domestic new fab investment amidst global semiconductor supply chain stabilization efforts. However, profitability fell slightly due to the increase in cost caused by the delay of the advanced node ramp-up.

In the first quarter, Samsung will focus on improving its advanced process yield to improve its supply stability. Also, the Company will continue technical leadership through mass production of the 1^st generation GAA process in the first half of 2022.

For this year, Samsung expects supply to remain tight due to rising penetration of 5G, solid HPC demand, growing out-sourcing from IDM players and continued needs for securing safety inventory. The Company aims to exceed market growth by expanding capacity at advanced nodes, adjusting prices and adding new customers.

Mobile Panel Earnings Improved; To Focus on OLED and QD Displays in 2022
The Display Panel Business posted KRW 9.06 trillion in consolidated revenue and KRW 1.32 trillion in operating profit for the fourth quarter.

The mobile panel business saw its earnings continue to improve, primarily driven by solid demand for newly launched smartphones from its key customers. In addition, increased sales of products for new applications including laptops and gaming consoles contributed to the mobile panel earnings.

For the large panel business, however, its losses widen in the fourth quarter due to declines in LCD ASP and initial costs related to QD displays.

Looking ahead to the first quarter, Samsung forecasts improved results year-on-year for the mobile panel business, thanks to a release of new smartphones by its major customers and a growing customer base in the foldable display.

In the large panel business, losses are expected to be partially mitigated on the mass production of QD displays as TVs and monitors adopting QD displays are to make debut in the markets.

In 2022, solid demand for OLED is likely to continue despite macro environment-related risks, based on rising penetration of 5G and growth of the foldable market. Samsung will pursue a balanced business structure for stable growth by expanding Flexible OLED to mid-range devices as well as diversifying applications for Rigid OLED including IT, gaming and automotive.

For the large panel business, the Company will strive to secure technology leadership in the ever-growing premium segment with QD displays while winding down its LCD line as planned.

Mobile to Focus on Flagship, Strengthening Mass Market 5G Lineup
The MX and Networks businesses posted KRW 28.95 trillion in consolidated revenue and KRW 2.66 trillion in operating profit for the fourth quarter.

Overall market demand increased from the third quarter due to strong year-end seasonality. Despite the component supply shortage, the MX Business saw a slight revenue growth quarter-on-quarter driven by sales increase in premium smartphones including foldable lineup and Galaxy S series. Device Ecosystem products such as PCs, tablets and wearables have also contributed to the revenue growth. Meanwhile, increased marketing expenses to boost foldable category sales and prepare for the launch of new models in Q1 2022 had impact on profitability to some degree.

Looking ahead to the first quarter, demand for smartphones and tablets is forecast to decline quarter-on-quarter amid weak seasonality as well as uncertainties over component supply. However, the MX Business aims to secure solid profitability by expanding flagship sales such as Galaxy S21 FE and upcoming release of a new Galaxy S series. Also, Samsung will proactively target replacement demand with competitive mass-market 5G lineup and growth opportunities in the market while continuing to increase sales of Device Ecosystem products such as PCs, tablets and wearables.

In 2022, uncertainties related to prolonged pandemic and component shortage are likely to persist. Yet, the smartphone market is expected to continue to grow and the wearable market is likely to see a double-digit growth. The MX Business will solidify its leadership in the flagship market by accelerating innovations and differentiated experience such as Galaxy S and foldable series, while strengthening competitiveness of mass-market 5G lineup and Device Ecosystem products. With these efforts, the Company will strive to achieve material growth in 2022 and continue its efforts to enhance profitability with an improved product mix and operational efficiency.

As for the Networks Business, the fourth quarter performance improved quarter-on-quarter thanks to growth both in domestic and overseas markets. Samsung will actively explore new business opportunities in overseas including Europe, while also responding to its 5G networks expansion in South Korea. At the same time, the Company will further improve its in-house 5G chip and solidify foundations for growth.

Visual Display and Digital Appliances to Continue Focus on Premium and Lifestyle Products
The CE businesses recorded KRW 15.35 trillion in consolidated revenue and KRW 0.7 trillion in operating profit for the fourth quarter of 2021.

The overall TV market grew quarter-on-quarter due to year-end seasonality, but decreased year-on-year due to fading effects of pent-up demand. The Visual Display Business saw strong sales of its premium and lifestyle products, but recorded slightly lower operating profit quarter-on-quarter due to rising costs, including for logistics. The Digital Appliances Business saw slow market growth in 4Q due to fading pent-up demand, in addition to a continued rise in material and logistics costs. However, Samsung achieved better profits compared to the previous quarter, thanks to an improved product mix and operational efficiency.

In the first quarter, market demand is expected to decrease year-on-year for both TVs and home appliances and high material and logistics costs are expected to persist for home appliances. The Company will continue its focus on premium and lifestyle product sales and improved operational efficiency. The Visual Display Business plans to expand premium product sales with promotional activities such as those associated with regional sporting events. It will also focus on sales of its Lifestyle category, including The Freestyle, a new product announced at CES 2022. The Digital Appliances Business aims to further expand its Bespoke lineup in global markets and enhance online sales.

In 2022, while market uncertainties are projected to remain, Samsung expects stronger demand for premium and super large TVs. In addition to its continued focus on premium and lifestyle TVs, it plans to offer an improved home entertainment experience, with various services and the Smart Hub, optimized for in-home activities. The Company expects a sluggish market for home appliances, but expects demand to edge up for new-category lifestyle products. Samsung plans to further expand its Bespoke lineup and continue to launch new-category products that reflect changing consumer needs.