Sat, 15-Aug-2020
Thursday 30 Jul 2020 , 7:45 am

Samsung Expects Smartphones Demand to Drive Second Half Earnings

Operating profit at Samsung’s chip business surged 60% to 5.43 trillion won in the second quarter, accounting for two thirds of its total 8.1 trillion won profit.
By SIN Bureau
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Samsung Electronics Co Ltd expects a global recovery in demand for smartphones and consumer electronics to underpin profits in the second half of the year, after a coronavirus-propelled shift to online working boosted quarterly earnings.

Samsung tempered its relatively upbeat forecast when announcing second quarter results on Thursday with a warning that the pandemic and trade disputes posed ongoing risks for earnings.

Samsung posted a 23% jump in operating profit in the April-June quarter on the back of strong DRAM memory chip sales to online server providers, along with cuts in marketing costs.

Prices for the chips, which create temporary workspaces to allow devices to multitask, spiked in the second quarter as people shifted to working and learning online from home because of the pandemic. Samsung’s Korean peer SK Hynix and U.S. firm Micron Technology Inc also benefited from the trend.

Operating profit at Samsung’s chip business surged 60% to 5.43 trillion won in the second quarter, accounting for two thirds of its total 8.1 trillion won profit.

Samsung said it expected server demand for chips to remain solid for the remainder of the year and a boost in smartphone demand, given planned product launches and anticipated demand for 5G-capable phones.

Still, Samsung and other Asian tech companies in the global supply chain have been rocked by trade tensions between the United States and China that has put cross-border trade in components, devices and technology at the mercy of politics.

“Given many uncertainties including COVID-19, trade tension and that customers may change their inventory and investment strategies, it’s still difficult to say when (DRAM) price will hit an inflection point,” senior vice president of memory business Han Jin-man said to Reuters.

The company would keep a close eye on chip inventory levels at data centre firms who stockpiled in the first half to meet telecommuting demand, he said.

SK Hynix and some analysts have painted a more downbeat outlook, expectating a fall in DRAM chip prices.

Choi Young-san, analyst at E-Best Securities said to Reuters, “Demand for the second half … will be relatively weak … but it’s not going to be a hard landing as the market had feared”.

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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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