Samsung Electronics posted its highest operating profit in five years in the fourth quarter of the last fiscal year.

The development is based in part on solid demand for electronic memory components.

According to analysts, the company also benefited from the scarcity of logic chips that Samsung manufactures for itself and for its customers.

The result was negatively affected by the payment of a one-time bonus payment to employees, which Samsung explicitly listed in its brief press release.

Patrick Welter

Correspondent for business and politics in Japan, based in Tokyo.

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The most important South Korean company reported an increase in operating profit in the period from October to December by 52 percent to around 13.8 trillion won (10 billion euros).

Sales were then at around 76 trillion won, 23 percent higher than a year ago.

Samsung will present a complete quarterly report and details on the individual business areas on January 27th.

Share price rises

The operating profit estimate fell short of analysts' expectations, who had forecast an operating profit of 15 trillion won.

The discrepancy could be explained by the bonus payments and higher sales costs in the business with smartphones.

Investors on the Seoul stock exchange nevertheless rewarded the result with price gains.

In early trading, the rate rose 1.6 percent to more than 78,000 won.

If the preliminary information is confirmed, the electronics company would have increased profits and sales even more than before in the second year of the pandemic.

For the full year, Samsung would have achieved its highest operating profit since 2018 with 51.6 trillion won.

At 279 trillion won, sales would be around 18 percent higher than in the previous year.

For Samsung, the past year was marked by the great demand for semiconductors, which contributed the lion's share of profits.

Data services in the cloud are booming and support orders for memory modules and logic chips.

Samsung is investing heavily to build custom logic chip manufacturing for customers and to gain market share against market leader Taiwan Semiconductor Manufacturing.

The general shortage of semiconductors gives the company a special boom.

The business with memory modules, in which Samsung leads the world market, experienced a dent in the second half of the year because customers had previously built up larger inventories during the pandemic. That depresses the prices for the memory chips. In the final quarter of the year, prices for volatile DRAM chips fell by about 5 percent and for NAND memory by about 3 percent, estimates the South Korean securities firm Hanwah Investment & Securities. Prices fell less than initially assumed.

Analysts are now arguing that the feared excess weighting of supply over demand for memory modules could be avoided by further horrors of the Covid pandemic, of all things.

Because the corona-related closure of the old Chinese imperial city of Xi'an by the authorities is affecting production there.

This affects the factories of Samsung Electronics and the competitor Micron Technologies and thus reduces the supply of memory modules.