Samsung's 2020 operating profit soars 29.46%

By Baek Byung-yeul

Samsung Electronics estimated its total operating profit for 2020 is likely to jump 29.46 percent compared to 2019 thanks to the performance of its semiconductor business.

In its fourth quarter earnings guidance released Friday, the tech giant said overall it expects to post 236.26 trillion won ($215.6 billion) in sales for the year and 35.95 trillion won in operating profit, up 2.54 percent and 29.46 percent from a year earlier, respectively, despite a tailing off in the October to December period.

The company estimated its sales for the quarter at 61 trillion won and operating profit at 9 trillion won, down 8.9 percent and 27.13 percent from the previous three months. The diminished figure is not completely unexpected as the company enjoyed explosive demand for chips in the second and third quarters of 2020.

The reinforced lock down measures to control the spread of virus in the company's major markets such as Europe also negatively affected the company's performance in the quarter.

However, given the fourth quarter is traditionally an off-season for the IT industry and the company faced a weak U.S. dollar, industry analysts said Samsung Electronics posted a solid performance.

The firm didn't reveal details of its earnings but the analysts presumed its core semiconductor business generated operating profits of around 4 trillion won despite the global economy's struggle with the impact of the COVID-19 pandemic.

Over the whole of 2020, the company is forecast to post about 19 trillion won in operating profit, more than half of its entire profit.

The company's smartphone business is expected to log over a 2 trillion won operating profit in the fourth quarter, nearly half that of the third quarter when the company enjoyed robust sales before Apple launched its new iPhone. The consumer electronics business which supervises the sales of TVs and home appliances is also forecast to post around 800 billion won in operating profit for the fourth quarter.

Its display panel business is expected to post billions of won in operating profit thanks to increased prices for OLED and LCD panels.

Samsung Electronics is also expected to continue performing well this year as its foundry and memory chip businesses are seeing explosive demand.

The analysts indicated both the foundry business, which manufactures semiconductor chips ordered by design firms, and memory chip business are riding on a so-called “semiconductor super-cycle” thanks to rising chip demand.

They added the growing self-driving car business will greatly increase demand and consequently help Samsung rack up even stronger earnings.

“DRAM prices will continue to rise until the first half of 2022 and the growing self-driving car market will rewrite the demand cycle for semiconductors,” eBest Investment and Securities analyst Choi Young-san noted.