ReutersApr 07, 2020 09:56:23 IST
Samsung Electronics Co Ltd said on Tuesday its first-quarter operating profit likely managed to rise slightly from the slump of the previous year, as solid chip sales helped dampen the blow from the coronavirus pandemic on smartphones and TVs.
The global leader in semiconductors benefited from higher chip demand from laptop makers and data centers amid changes driven by coronavirus to work from home.
But at the same time, the South Korean tech giant also expects greater sales of mobile phones and consumer electronics in the current quarter as new coronaviruses sweep across Europe and the United States – the main market for smartphones and premium TVs.
Samsung said operating profit was estimated at 6.4 trillion won ($ 5.2 billion) in the quarter ended March, compared with 6.2 trillion won a year ago and an estimate of 6.2 trillion won from analysts according to Refinitiv SmartEstimate.
Revenue is likely to rise 5 percent to 55 trillion won from a year ago, in line with the estimated 55.6 trillion won.
Samsung Electronics shares rose 1.6 percent in morning trade, compared with a 1.3 percent increase from the wider market.
Makers of smartphones, TVs, equipment, memory chips, and displays are the first global technology companies to report earnings estimates for the January-March quarter.
Samsung Electronics said in March the coronavirus pandemic will damage smartphone and consumer electronics sales this year, while demand from data centers will trigger a recovery in the memory chip market.
First-quarter results were smaller than Samsung’s internal estimates from early March, and the company expects a bigger hit from the virus in the second quarter, someone familiar with Samsung’s operations said.
“Even though Samsung’s cellular business was hit by a coronavirus outbreak this quarter, it is likely to face even greater challenges in the second quarter – now that the United States and Europe have been the hardest hit countries,” Kim Sun-woo, an analyst at Meritz Securities, said.
Hana Financial Investment recently cut its estimate for Samsung smartphone shipments to 260 million, from an initial estimate of 300 million due to slower demand for high-end smartphones, which will also erode the margins of its cellphones.
Foxconn Taiwan, a major supplier of Apple Inc. products, said on Monday that January-March revenue was down 12 percent from a year earlier, after Apple warned that it might not meet March quarter sales guidelines.
When the outbreak first began in China last year, Samsung’s strategy to spread its production base to countries including Vietnam and India seemed to have paid off when supply disruptions in China hit competitors such as Apple.
But when the virus spread throughout the world, Samsung also had to close factories and retail stores in Europe, India and the United States.
The company did not provide details about expected revenue for each division in its guidelines released on Tuesday.
Analysts said the company’s memory chip business, which generated more than 50 percent of its operating profit in 2019, will likely report better-than-expected results in the first quarter.
Memory chip prices are rising because work-from-home requirements increase demand from data centers that support internet services such as streaming and cloud computing, analysts said.
Prices for DRAM memory chips have risen more than 3.5 percent since January, according to the industry tracker DRAMeXchange.
Many analysts expect Samsung to rebound strongly from the worst operating profit in four years in 2019, but the pandemic has forced some to lower their earnings forecasts for this year due to pressure on smartphone sales.
A longer coronavirus crisis could also extend to the chip sector, analysts said.
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