Samsung Electronics forecast that its third-quarter operating profit rose nearly 60 per cent to its highest level in two years, as its smartphone and chip businesses benefited from tougher US sanctions on China’s Huawei.
Strong sales of smartphones and home appliances including TVs drove earnings at Samsung during the quarter, which were above analysts’ forecasts, as consumer demand recovered after the coronavirus pandemic. That helped to offset the impact of lower chip prices.
The South Korean company briefly ceded the top spot in global smartphone sales to Huawei in the second quarter but is quickly regaining its footing. Rival Apple delayed its new iPhone launch to later this month and a US ban began to choke off Huawei’s access to mobile chips from mid-September.
Samsung’s semiconductor division also fared better than analysts expected thanks to emergency chip orders from Huawei. The Chinese group is believed to have stocked about six months’ worth of inventories prior to the US ban taking effect on September 15.
Samsung, the world’s largest memory chipmaker, on Thursday estimated that its operating profit rose 58 per cent in the three months to September from a year earlier to Won12.3tn ($10.6bn). Analysts polled by Refinitiv had projected operating profits of Won10.5tn. Sales are forecast to have increased 6.5 per cent year on year to Won66tn.
The preliminary earnings released by Samsung come ahead of a more detail breakdown of its quarterly financial results, due to be published later in the month.
The South Korean group has redoubled its efforts in the smartphone market, including unveiling a new flagship foldable phone in August.
“Samsung did not have real major competitors in the smartphone market last quarter while marketing costs were sharply reduced by online sales during the pandemic,” said Kim Young-woo, an analyst at SK Securities. He estimated that Samsung shipped about 78m smartphones in the third quarter, compared with 50m in the quarter immediately prior.
However, analysts expect Samsung’s momentum to weaken in the fourth quarter as competition intensifies with the much-anticipated launch of Apple’s 5G iPhone this month.
Kim Un-ho, an analyst at IBK Investment & Securities, believes Samsung’s full-year operating profit will be Won35tn, compared with Won27.8tn in 2019, even as chip prices are expected to fall further due to weak server demand.
He estimated that average selling prices of DRAM chips, which enable mobile devices to perform multiple tasks at once, fell about 7 per cent in the September quarter compared with the previous three months. Those of NAND chips, which are used to store data, fell about 5 per cent.
Samsung’s semiconductor division accounted for about half of its operating profit last year, while smartphones made up a third.
The company is stealing market share from Huawei in terms of smartphone and 5G equipment following restrictions imposed by Washington. But analysts expect Huawei’s woes could dent Samsung’s chip sales in coming quarters, given the Chinese group is thought to account for about 3 per cent of its total sales of semiconductors.
The Link LonkOctober 08, 2020 at 09:23AM
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Samsung’s profits soar as US sanctions rival Huawei - Financial Times
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