Driven by strong demand for chips, Samsung expects quarterly profit to jump 25%

by bold-lichterman

South Korean giant Samsung Electronics announced on Friday that it was expecting a 25% jump in operating profit in the fourth quarter, boosted by the very strong demand for chips induced by the rise of teleworking, in the context of the pandemic . The world’s largest smartphone and chip maker said in a statement it expected operating profit of around 9 trillion won (6.7 billion euros) between October and December.

In 2019, it had generated 7.160 billion won over the same period. These forecasts are relatively below the expectations of analysts who expected 9.340 billion won, according to the firm FnGuide. That didn’t stop Samsung’s stock from surging, however, ending up 7.12% on the Seoul Stock Exchange. The coronavirus pandemic has had devastating economic consequences across the planet, but many technology groups have managed to do well, even recording growth in their activity.

Giant LG, South Korea’s second-largest home appliance maker behind Samsung, said on Friday expected the highest operating profit on record for the fourth quarter, more than five-fold in one year to reach 647 trillion won. South Korea returned to growth in the third quarter on the back of its good performance on the export front. Both in terms of operating profit and turnover (61 trillion won), the forecasts announced on Friday by Samsung remain however lower than the performance recorded by the group in the third quarter, when it was boosted by sanctions American orders against its competitor Huawei.

Galaxy vs. iPhone

Experts explain this state of affairs by the appreciation of the won and the success of the iPhone 12, which big rival Apple launched in October. ” Samsung’s inexpensive and mid-range smartphones account for 80% of its mobile division’s revenue ”, observes Jusy Hong, of the Omdia group. “But Chinese groups like Xiaomi, Vivo and Oppo have increased their market share in the mid-range in regions like India and Southeast Asia. ” The good health of Samsung Electronics, flagship of the Samsung group, is crucial for the South Korean economy.

The group is by far the largest of the “chaebols”, the family conglomerates behind the country’s tremendous recovery after the Korean War. Its turnover represents one fifth of the GDP of the 12th largest economy in the world. Analysts believe the outlook for the company is rather favorable in 2021, due to sustained demand for memory and growth in the electronics and chip sectors. They also believe that the group’s mobile activity will continue to grow, as Samsung will unveil the next version of its iconic Galaxy next week.

A good year for the chip industry?

The chipmaking industry is also expected to have a good year due to the spread of homeworking due to the pandemic, according to Taipei-based company TrendForce. “2021 will be a year of growth for Samsung’s chip manufacturing business”Counterpoint analyst Sujeong Lim told AFP. “The demand for semiconductors for 5G, IoT (Internet of Things) and high performance smartphones is exploding. “

Samsung is not completely finished with the days of business, however, as the group’s heir and son of the late president, Lee Jae-yong, awaits the outcome of his retrial for his involvement in the resounding scandal. of corruption that precipitated the 2017 impeachment and conviction of former South Korean President Park Geun-hye. The prosecution requested nine years of detention last week against Mr. Lee. Samsung could therefore find itself deprived of its boss if the court followed the requisitions. The decision is expected later this month.