Samsung, LG to see strong earnings in Q2
By Kim Bo-eun
Samsung, LG's logos / Korea Time file
Samsung and LG electronics are set to continue displaying handsome earnings performances through the second quarter, backed by rising memory chip prices and booming sales of household appliances and TVs.
Both electronics giants achieved record profits in the first quarter of this year, bolstered by growing demand for IT devices amid the COVID-19 pandemic. They are set to unveil their second quarter earnings guidance this week.
According to financial data provider FnGuide, Samsung's earnings consensus for this period is 61.44 trillion won in sales and 10.74 trillion won in operating profit. This would be a 16 percent and 31.9 percent growth, respectively, year-on-year.
Samsung's second quarter earnings are projected to be fueled by higher memory chip prices. According to market tracker DRAMeXchange, the fixed price of PC DRAM as of April stood at $3.8, up 26.67 percent from the previous month. The fixed price of NAND flash was $4.56 in April, up 8.57 percent compared to the previous month. DRAM and NAND flash chip prices flattened in the following month.
Given Samsung's dominance in the global DRAM and NAND flash markets, the chipmaker is expected to have benefited from the rise in semiconductor prices. This is backed by the demand for network equipment. According to market tracker Trendforce, Samsung accounted for 42 percent of the global DRAM market and 33.5 percent of the NAND flash market based on first quarter sales.
In addition, non-memory earnings are also set to recover following normalized operations in May at Samsung's fabrication plant in Austin, Texas after a shutdown in the first quarter due to an unseasonal snow storm.
Samsung's semiconductor business is expected to have accounted for more than 6 trillion won out of a total second-quarter operating profit of 11 trillion won. The display business is set to see earnings grow based on a rise in prices of liquid crystal display (LCD) panels.
"Projections are that the company's semiconductor cost structure will improve with the rise in DRAM and NAND prices and also for display earnings to improve," KB Securities analyst Kim Dong-won stated in a report.
The earnings consensus for LG Electronics for the second quarter is 16.97 trillion won in sales and 1.12 trillion won in operating profit. These are each up 32 percent and 127 percent year-on-year respectively.
If LG attains the projected earnings, it would be the first time since 2009 that the electronics giant recorded over 1 trillion in operating profit in the second quarter.
Household appliance and TV sales are projected to have driven LG's earnings. This is based on continued demand for new appliances, such as dishwashers, steam closets and OLED TVs as the pandemic has stretched on into the second quarter.
Sales of air conditioners ahead of the summer season are also projected to contribute to LG's second quarter earnings.
"The second quarter has seen strong sales of air conditioners as a busy quarter for home appliances, and demand for premium appliances is also solid," Eugene Securities analyst Noh Kyoung-tak said in a report.