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| Samsung Electronics building in southern Seoul. / Yonhap |
Korean tech giant's Q2 operating profit jumps 22.7%
By Kim Hyun-bin
Samsung Electronics has so far managed to weather the fallout of the COVID-19 pandemic, with its second-quarter operating profit estimated to have reached 8.1 trillion won, up more than 20 percent from the same period last year.
Despite the severe impact of the coronavirus on mobile phone sales, industry officials said the preliminary earnings report isn't surprising as the pandemic is accelerating a digital transition that is boosting demand for memory semiconductors for corporate servers. Samsung is the world's largest supplier of both DRAM and NAND flash-type memory chips.
In the company's preliminary earning's report, the company is expected to report earnings of 8.1 trillion won ($6.7 billion) for the April to June period, a 22.7 percent increase from 2019.
"There has been a rise in the server and PC chip sectors due to the drastic increase in contactless environment measures," an official from Samsung Electronics said.
Despite weak smartphone sales, the emerging need for contactless options that allow people to work from home, take online classes, participate in video conferences and play games has increased semiconductor demand, especially in the server and PC sector.
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In addition, the benchmark price for DRAM semiconductors rose for five consecutive months through May, from $2.84 in January to $3.31 in May, though it remained almost flat in June.
Some analysts predict Samsung's chip business could report at least 5 trillion won in operating profit in the second quarter, which will be the highest since the fourth quarter of 2018, when it reached 7.7 trillion won.
Consumer electronics also performed better than expected as online sales from large distribution businesses in the U.S. and Europe increased, according to sources familiar with the issue.
However, the mobile sector suffered sluggish sales of its flagship Galaxy S20 due to the pandemic, but luckily started to show a rebound in June.
Samsung's mobile and consumer electronics units are said to have exceeded market expectations in June as major countries started to reopen their economies.
Its visual display business division also helped out in the second quarter as profitability in the North American market rose.
Industry watchers predict Samsung Electronics' third quarter performance will be much better as the company expects to see an upturn in demand for mobile phones, displays and appliances in the second half of the year.
"The performance in the semiconductor sector is expected show better results than the first quarter, but the performance in the second half of this year is predicted to slow. The mobile sector turned out weak compared to the first quarter due to reduced shipments and sales, but it's expecting a large improvement in sales in the second half of the year," Kim Uno, an analyst at IBK Securities said.
However, there are some worries that a possible second COVID-19 wave could impact the industry in the coming months.
"In the latter half of the year there will be a rise in uncertainties due to COVID-19, which will lead to a slowdown in the economy and the electronics sector. The pandemic will also delay any economic recovery and the intensifying U.S.-China trade war is also expected to further contract the market," an industry official said.
