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Samsung's profits rise 23% in Q2 as work from home takes centre stage

Work-from-home orders and growth in online learning is underpinning chip demand amid the COVID-19 pandemic and pushing up DRAM memory chip prices

twitter-logoReuters | July 7, 2020 | Updated 12:08 IST
Samsung's profits rise 23% in Q2 as work from home takes centre stage
"Chip demand was stronger than expected due to the COVID-19," said Park Sung-soon, an analyst at Cape Investment & Securities

Samsung Electronics Co Ltd said on Tuesday second-quarter operating profit likely rose 23%, 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 Inc. 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 (5.44 billion pounds) 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 said. Work-from-home orders and growth in online learning is underpinning chip demand amid the COVID-19 pandemic and pushing up DRAM memory chip prices. U.S. DRAM supplier Micron Technology Inc forecast strong quarterly revenue last month.

"Chip demand was stronger than expected due to the COVID-19," said Park Sung-soon, an analyst at Cape Investment & Securities. Analysts also said the handset and TV business may have fared better than expected due to lower marketing costs and as stores resumed operations worldwide as countries lifted lockdowns.

"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 United States and other countries

While prices jumped 14% on average in the quarter, they were flat in June versus May, data from DRAMeXchange showed. Shares of Samsung Electronics fell 0.9%, against a 0.4% rise in the wider market. Samsung released only limited data in Tuesday's regulatory filing ahead of the release of its detailed earnings figures later this month.

Also read: How Infosys delinked business growth from resource consumption

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