Samsung Electronics 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 coronavirus pandemic.
The sales offset weak demand for smartphones and TVs, while one-off gains from its display business, which counts Apple 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 (US$6.8-billion) in the quarter ended 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 Covid-19 pandemic and pushing up DRAM memory chip prices. US DRAM supplier Micron Technology forecast strong quarterly revenue last month.
“Chip demand was stronger than expected due to Covid-19,” said Park Sung-soon, an analyst at Cape Investment & Securities.
Apple boost
Analysts said the one-off display boost reflected a payment from Apple, with the US smartphone maker struggling to meet agreed shipment targets as iPhone sales take a hit from the Covid-19 pandemic.
The payment was estimated at a 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, analysts said.
“The damage from the pandemic was less severe than the market had expected,” said CW Chung, Nomura head of research in Korea.
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 US and other countries
While prices jumped 14% on average in the quarter, they were flat in June versus May, data from DRAMeXchange showed.
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 suspicions 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. — Reported by Heekyong Yang and Hyunjoo Jin, (c) 2020 Reuters
