Sat, 15-Aug-2020
Tuesday 07 Jul 2020 , 11:04 am

Samsung Electronics Flags Second-quarter Profit Jump on Solid Chip Demand, One-off Gains from Apple

Work-from-home orders and growth in online learning are underpinning chip demand amid the coronavirus pandemic and pushing up DRAM memory chip prices.
By SIN Bureau
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Samsung Electronics Co Ltd flagged a 23% rise in second-quarter operating profit on Tuesday, beating analysts’ estimates on solid chip sales to data centres catering for a work-from-home economy during the novel coronavirus pandemic.

The sales offset weak demand for smartphones and televisions, while one-off gains from its display business, which counts Apple Inc. as a customer, also boosted profits, the company said. It gave no further details.

The world’s top memory-chip and smartphone maker said operating profit was likely 8.1 trillion won ($6.8 billion) in the quarter that ended in June, far above the 6.4 trillion won analyst forecast by Refinitiv SmartEstimate. It would be the highest quarterly profit since the fourth quarter of 2018.

Revenue likely fell 7% to 52 trillion won from a year earlier, Samsung added, giving only limited data in a regulatory filing ahead of its full earnings figures later this month.

Work-from-home orders and growth in online learning are underpinning chip demand amid the coronavirus pandemic and pushing up DRAM memory chip prices. U.S. DRAM supplier Micron Technology Inc forecast strong quarterly revenue last month.

Analysts said the one-off display boost reflected a payment from Apple, with the U.S. smartphone maker struggling to meet agreed shipment targets as iPhone sales take a hit from the pandemic.

The payment was estimated at 1 trillion won, bigger than a similar 800 billion won payment a year ago, they said.

The handset and TV business may have also fared better than expected due to lower marketing costs and as stores and factories resumed operations worldwide as countries lifted lockdowns aimed at stopping the virus, analysts said.

Analysts, however, warned that increases in memory chip prices may not continue in the second half of the year as data centre customers are likely to be conservative in stockpiling chips given the resurgence of COVID-19 cases in the United States and other countries

While prices jumped 14% on average in the quarter, they were flat in June versus May, data from DRAMeXchange showed.

Shares of Samsung Electronics fell 1.8%, versus a 0.4% fall in the wider market as of 0206 GMT.

The South Korean tech giant’s resilient earnings, despite the pandemic, came even as its leader, Jay Y. Lee, faces fresh legal troubles.

State prosecutors are investigating Lee on suspicion of resorting to accounting fraud and stock price manipulation to win control of Samsung Group, Korea’s largest conglomerate. Lee’s attorneys have denied such allegations.

LG Electronics, Samsung’s crosstown rival in TVs, phones and home appliances, meanwhile, said its second-quarter operating profit likely fell 24% to 493 billion won, ahead of a 374 billion won forecast by SmartEstimate.

Analysts said easing of lockdown measures had helped demand for consumer electronics recover slightly.

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Neha Mule

Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.

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