This photo, taken on April 7, 2020, shows the outdoor signage of Samsung Electronics Co. at its office building in Seoul. (Yonhap)
SEOUL, June 29 (Korea Bizwire) — Samsung Electronics Co.’s second-quarter earnings could be better than expected, analysts here said Monday, as its robust chip business is likely to offset losses in its smartphone and display businesses amid the novel coronavirus pandemic.
Samsung was expected to log 53.39 trillion won (US$44.4 billion) in sales in the April-June period, down 5.5 percent from a year earlier, while operating profit was estimated to drop 2.3 percent on-year to 6.44 trillion won over the period, according to data compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.
Samsung, the world’s largest memory chip and smartphone vendor, earlier expected weak second-quarter earnings, citing the impact of the COVID-19 pandemic on advanced markets like the United States and Europe.
The South Korean tech titan is scheduled to announce its second-quarter earnings guidance next week.
Analysts have been raising their earnings outlook for Samsung in recent weeks, however, as the pandemic-driven stay-at-home economy apparently sparked more demand for server chips.
In the first two weeks of June, analysts expected Samsung to post only 50 trillion won in sales and operating income around 6 trillion won.
“Despite earnings decline from its mobile business and widened losses from its display business, Samsung could post estimate-beating earnings results due to a rise in memory chip prices,” Lee Seung-woo, an analyst at Eugene Securities, said.
According to market tracker TrendForce, global server shipments in the second quarter are expected to post a 9 percent increase from three months earlier due to increased non-face-to-face activities including teleconferencing and media streaming.
Data from DRAMeXchange, a research division of TrendForce, also showed the contract price for 8-gigabit DDR4 DRAM, a benchmark price for the category, rose for five straight months, from $2.84 in January to $3.31 in May.
Analysts predicted that operating profit from Samsung’s chip business will exceed 5 trillion won in the second quarter, up from 4 trillion won three months ago.
Samsung Electronics Co.’s chip manufacturing plant in Hwaseong, south of Seoul. (image: Samsung Electronics)
However, Samsung’s display business was expected to stay in the red, with its losses further widened due to a decline in smartphone and TV demand.
Analysts also estimated a sharp earnings drop in Samsung’s mobile business in the second quarter due to sluggish sales of the company’s high-end Galaxy S20 smartphone series.
Some industry watchers have expected operating income of Samsung’s mobile business in the second quarter to fall by at least 1 trillion won from the previous quarter.
But the earnings forecast for Samsung’s mobile business was still better than analysts’ early estimates as they pointed out global smartphone demand has shown signs of a recovery from June.
“We are raising Samsung’s smartphone sales estimate from 50 million units to 55 million units in the second quarter,” Kim Kyung-min, an analyst at Hana Financial Investment, said.
“This is mainly because of demand recovery after the coronavirus outbreak.”
Samsung was estimated to have sold 59 million smartphones in the first quarter, according to industry tracker Counterpoint Research.
Samsung’s consumer electronics business was expected to stay flat from the first quarter, with some predicting a slight increase in operating profit as TV sales could be above expectations.
Analysts said Samsung is likely to see a big jump in the third quarter, with operating profit reaching 9 trillion won, as its mobile and display businesses will rebound.
“Samsung’s set business is expected to increase sales from the third quarter as it enters the peak season,” Kim Dong-won, an analyst at KB Securities, said.
“The rise of non-face-to-face activities will also lead to solid demand for server DRAM chips and enterprise solid state drive products in the second half.”
(Yonhap)
