Samsung expects 'fair' Q1 profit on chips
A Samsung phones shop is closed during a government-imposed nationwide lockdown as a preventive measure against the COVID-19 coronavirus, in New Delhi, India, on April 3. AFP-Yonhap
By Kim Yoo-chul
By Kim Yoo-chul
Despite the spread of COVID-19, Samsung Electronics said its operating profit for the first quarter of 2020 will rise, year-on-year.
In a statement Tuesday, the tech giant said it was expecting to report 6.4 trillion won during the first three months of the year, up 2.73 percent from the same period last year. Quarterly sales reached 55 trillion won, up 5 percent, year-on-year.
Samsung Electronics didn't announce the performance of each of its divisions as it plans to detail the specifics of the earnings later this month.
Local brokerages estimated earlier that Samsung's operating profit for the quarter would be around 6.09 trillion won.
The “fair” first quarter results come as Samsung has been impacted to various degrees on multiple fronts by the coronavirus pandemic as it also sells home appliances, including televisions, as well as smartphones. Officials said the pandemic had forced the firm to close some of its manufacturing plants and retail stores ― a negative factor for sales and profits.
Analysts predicted Samsung's smartphone and other mobile sales to be between 22 trillion won and 24 trillion won, down around 4 percent to 11 percent, quarter-on-quarter. Operating profit for this business division was estimated at about 2 trillion won, down from 2.3 trillion won a year ago.
But a relatively weak Korean won, strong cost-saving moves and increasing demand for semiconductors are cited as core factors helping Samsung cushion the negative impact of the pandemic on smartphone and television sales, the officials said.
The outlook for the second quarter is looking solid in both sales and profits as unprecedented production cuts last year are starting to take full effect as capacity expansion is put on hold. Semiconductor manufacturing is Samsung Electronics' most important cash-generating business due to its longtime leadership in the memory chip sector.
“The current quarter is looking good as the memory chip industry should remain relatively resilient during the COVID-19 pandemic. The company is relatively worse positioned with its highest exposure in mobile and consumer electronics, and least exposure to the recovery that officials and analysts expect in China,” an industry official told The Korea Times.
China is starting to get back to business while North America and other regions are still seeing the worst of the pandemic ahead; although the work-from-home and study-from-home trends have led to opportunities in Samsung's key business regions. “Since the outbreak of the pandemic, consumers have been purchasing consumer electronics from home online. This trend will boost demand for memory chips at corporate datacenters, which provide a wide range of internet services,” the official said.
Memory chips are used in almost all digital devices, and the business accounts for about 67 percent of Samsung's total profits.
Given this, analysts said memory chip prices will continue to rise throughout the first half. Despite this rosy outlook, Samsung's TV and smartphone businesses are expected to continue to see less-than-impressive performances in the second quarter. This is due to supply constraints, lower Chinese demand and its shift to the more profitable QD-LED display business. Samsung is the world's leading smartphone manufacturer in competition with its bitter rival ― and long-time customer ― Apple.