Samsung Electronics forecasts 23% profit rise despite virus

Samsung Electronics forecast a 23% rise in second-quarter operating profit Tuesday, with strong demand for memory chips and displays overcoming the impact of the coronavirus pandemic on smartphone sales.

Samsung Electronics said in an earnings estimate that it expected operating profit to be $6.8 billion won for April-June, up from 6.6 trillion won in the same period last year.

The prediction was far ahead of analyst forecasts of a single-digit decline.

Lockdowns imposed around the world in the wake of the coronavirus pandemic, especially in Europe and the United States, have boosted Samsung’s chip business with data centres moving to stockpile DRAM chips to meet surging demand for online activities.

“The earnings surprise seems to have stemmed from Samsung’s memory chip sector,” said Park Jin-suk of market observer Counterpoint, pointing to “increased demand for memory chips for PCs and a continuing rise in DRAM chip prices”.

Similarly TV sales, which have been on a long-term decline, were “moving upward as people spend more time at home, leading to increased demand”, said James Kang, an analyst at market observer Euromonitor International Korea.

But Samsung also predicted overall sales in the second quarter would be down by 7.3 percent from a year earlier.

The firm is the world’s largest smartphone maker, accounting for 20 percent of global market share in the first quarter, ahead of China’s Huawei with 17 percent and Apple on 14 percent.

Global smartphone sales slumped more than 20 percent year-on-year in the first quarter, their worst performance ever, according to market tracker, as the pandemic hit consumer spending and sparked widespread economic uncertainty.

Samsung attributed the estimated operating profits rise to a one-off profit generated from its display division, without offering details.