What’s Going On Here?Samsung said on Friday that it’s expecting business to have boomed last quarter, and South Korea couldn’t be prouder of its homegrown chipmaking hero. What Does This Mean?Samsung won’t release last quarter’s results officially till the end of January, but it’s already started crunching the numbers. And they’re looking very tidy indeed: the chipmaker is expecting revenue to be 23% higher than the same time in 2020, mainly thanks to surging demand for its chips and smartphones. Its profit is looking even better, with the company forecasting a 52% uptick over the same period. That’s lower than analysts were expecting, but they also hadn’t realized quite how much Samsung would spend on marketing its smartphones – an investment which has the potential to pay off down the line. And even if it doesn’t, Samsung has another tailwind behind it: a Covid outbreak in central China has forced chip production plants to close, which should drag on supply and allow Samsung to up its prices even more. Why Should I Care?The bigger picture: All boom, no bust.
Chipmaking’s been described as a “boom-and-bust” industry, which goes like this: demand surges, chipmakers boost production, chipmakers end up making too many chips, prices crash. But nowadays chips are being used here, there, and everywhere, so there’s far less risk of making “too many”. No wonder, then, that analysts think semiconductors will bring in over $500 billion this year for the first time ever – making it a rare third consecutive year of revenue growth for the industry.
Zooming out: Carmakers are losing out.
Carmakers – which have become one of chipmakers’ biggest customers – have been finding it notoriously difficult to get their hands on semiconductors, forcing a good few companies to cut production and lose out on sales. Take Volvo: the Swedish carmaker reported last week that sales fell 18% last month versus the year before, and said the chip shortage was mostly to blame. | 