Samsung Estimates a 28.5% Rise in Second-Quarter Operating Profit
July 06 2020 - 09:17PM
Dow Jones News
By Elizabeth Koh
Samsung Electronics Co. forecast a 28.5% rise in second-quarter
operating profit Tuesday, as some components manufacturers ride out
the coronavirus pandemic by servicing a boom in internet use fueled
by remote working.
The world's largest smartphone and memory chip maker estimates
operating profit of 8.1 trillion South Korean won (about $6.78
billion) for the quarter ended June 30, up from the prior year's
6.3 trillion won.
The estimate, the company said, included a one-time gain related
to its display business, though it didn't specify the amount.
Samsung is the main supplier for flexible screens used in Apple
Inc.'s iPhones.
Samsung also said it expects revenue to decline from the
prior-year quarter by more than 7%, falling to 52 trillion won.
The guidance, which precedes Samsung's full report expected at
the end of the month, beat analysts' forecasts of about 6.3
trillion won in operating profit and 50.25 trillion won in revenue,
according to estimates gathered by S&P Global Market
Intelligence.
The numbers suggest that the global increase in computing demand
will, at least for now, provide the Suwon, South Korea-based
company with a partial life raft through the immediate economic
consequences of the Covid-19 pandemic.
The other main profit driver for Samsung, its smartphones
business, has a murkier path ahead, analysts said. During the first
three months of 2020, global smartphone shipments slid 17% over the
prior year, according to market-research firm Strategy Analytics.
Samsung saw declines of 19%, while Apple's shipments fell by 9%,
Strategy Analytics said.
As the pandemic's economic repercussions tanked consumers'
desire for premium and pricey handsets, sales for its phones
suffered. The company has moved to push more affordable options,
like its 5G-enabled Galaxy A71 to woo otherwise reluctant buyers --
undercutting other U.S. entrants by selling the device at around
$600.
The latter half of the year will pose another test for Samsung
as it unveils its new flagship Galaxy Note 20 phone in early August
against the backdrop of weaker consumer demand.
Analysts and industry experts expect semiconductor demand to
continue into the second half of the year, though the coronavirus
still poses some uncertainty. If that proves to be the case,
Samsung stands to benefit substantially from both the demand and
the price increases in the memory market, where the company
generates more than half of its operating profit.
As countries continue to grapple with how to control the
coronavirus's spread, seesawing between reopenings and shutdowns,
the shift to working-from-home or doing so predominantly online
increasingly looks like it will remain the new working normal,
analysts said.
Heavyweight customers that operate massive data centers, like
Alphabet Inc.'s Google and Amazon.com Inc., have continued to buy
up more chips to expand their computing power to keep up with
heavier internet usage. The in-demand chips also power other
components of internet and communications infrastructure, from 5G
base stations to computer processors.
The company also continues to grapple with several legal
challenges that resurfaced around Samsung's de facto leader, Lee
Jae-yong, last month. Mr. Lee, 51, avoided being issued an arrest
warrant in a financial fraud case involving a controversial 2015
intra-conglomerate merger, but he remains on trial in a related
bribery case.
(END) Dow Jones Newswires
July 06, 2020 21:02 ET (01:02 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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