SEOUL: Samsung Electronics Co Ltd announced on Wednesday its first stock split and said it expects demand for semiconductors to remain strong in 2018, as it posted record annual profit driven by a so-called memory chip “super-cycle.”
The tech giant’s stock split is the latest in a series of moves to bolster shareholder returns, including 5.8 trillion won ($5.4 billion) in annual dividends and 9.2 trillion won in share buybacks and cancellations in 2017.
The firm’s largesse has encouraged investors to hold shares despite concerns that the memory business may be peaking. The stock split will open the door to retail investors as well, boosting liquidity and underpinning valuations, analysts said.
“The stock split comes as a surprise to me,” said Kim Sung-soo, a fund manager at LS Asset Management who holds Samsung shares, noting that Samsung previously had shrugged off investors’ calls to split its shares.
“This will not have an impact on the company’s fundamentals, but it will increase supply of the stock and have a positive impact on shares.”
Led by a stellar fourth quarter, the global leader in televisions, memory chips and smartphones brought home an annual operating profit of 53.7 trillion won ($50.2 billion) in 2017, outstripping the previous record of 36.8 trillion won in 2013.
While the profit was expected, the firm’s shares surged more than 8 percent after it unveiled the stock split. They closed up 0.2 percent.
In further good news for shareholders, Samsung eased concerns that the huge expansion in the global semiconductor business may be tapering off, saying the outlook for 2018 remained strong.
Chip makers like Samsung, South Korean rival SK Hynix Inc and Intel Corp have been riding a boom in sales of semiconductors as the world demands ever greater processing capacity to power data centers, high-tech smartphones and the blockchain ledgers behind cryptocurrencies.
“Looking at the mid-to-long term, Samsung expects the components business to see demand expand from new applications,” the company said in a statement.
Samsung’s operating profit for the three months ended December leapt 64 percent on year to 15.15 trillion won ($14.13 billion), in line with its forecasts.
The chip business was Samsung’s top earner last year, posting a record operating profit of 35.2 trillion won and more than doubling its profit on-year in the fourth quarter alone.
Samsung said it expected DRAM and NAND flash chip shipments to grow on-year by about 20 percent and 40 percent respectively in 2018.
The foundry business, which makes chips to order, would jump from 4th place to be a “strong market No. 2” behind Taiwan Semiconductor Manufacturing Co Ltd (TSMC) in 2018, partly due to the cryptocurrency boom.
Published in Daily Times, February 1st 2018.