On Friday, global smartphone and memory chip leader Samsung Electronics Co. Ltd. (OTC: SSNLF) hinted at record profits for its second quarter, indicating that the company’s profit numbers may in fact come in almost 7% higher than analyst estimates on stronger than expected performance from Samsung in its memory chip and organic light-emitting diode (OLED) display business segments.
The company’s Q2 2017 operating profit guidance has come in around 14 trillion won ($12.1 billion U.S.), significantly higher than analyst estimates of only 13 trillion won. Revenues are also expected to come in higher than analyst expectations, with Samsung indicating that revenues for Q2 are likely to come in around 60 trillion won, one trillion won higher than the analyst consensus.
These strong numbers provided by management have indicated that a "super cycle" for memory chips may in fact be under way, supporting the arguments of some analysts that DRAM and NAND memory chips will continue to be undersupplied for the immediate future due to a supply/demand imbalance spurred by rising demand for increased computing power for mobile devices, coupled with lagging supply growth. This “super cycle” in the memory chip space has long been touted as a reason to invest in chip makers at today’s levels, as profitability in the sector is expected to outperform for the foreseeable future.
With a large jump expected for chip producers such as Samsung this year will likely plateau over the coming three to five years, analysts expect that the industry may right now be at a tipping point in terms of profitability and growth.
Invest wisely, my friends.
