SEOUL – South Korean tech giant Samsung Electronics today flagged a jump of more than a quarter in fourth-quarter (Q4) operating profits, with working from home during the coronavirus pandemic driving demand for the devices powered by its chips.
The world’s biggest manufacturer of smartphones and memory chips, in an earnings estimate, said it expects operating profits of 9 trillion won (RM33.27 billion) for October to December last year, up from 7.16 trillion won a year earlier.
The prediction is slightly short of analyst forecasts of 9.34 trillion won, compiled by market researcher FnGuide.
The figures come about two months after the burial of late chairman Lee Kun-hee – who turned Samsung Electronics into a global powerhouse – and as Covid-19 wreaks havoc on the world economy.
But, the pandemic has also seen many tech companies boom, while South Korea saw a return to quarter-on-quarter growth in Q3 last year, driven by a better-than-expected exports performance.
However, Samsung’s operating profits and 61 trillion won sales forecast are both lower than its Q3 figures, when its mobile and chip businesses were boosted by US sanctions against Huawei.
Samsung Electronics is crucial to South Korea’s economic health.
It is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled conglomerates known as “chaebols” that dominate business in the world’s 12th-largest economy.
Its overall turnover is equivalent to a fifth of the national gross domestic product.
Looking forward, analysts said the firm’s outlook for 2021 is fairly stable, driven by continued demand for memory, and growth in the consumer electronics and chip-manufacturing businesses.
They also expect Samsung’s mobile business to improve, with the firm to unveil its latest line-up of flagship Galaxy phones next week.
“Despite the pandemic, in Q1 to Q3 2020, Samsung’s mobile sales were down only modestly by 5% year-on-year,” said Gloria Tsuen, senior credit officer at Moody’s Investors Service.
“For 2021, hopefully with the pandemic situation to moderate, the company can generate some year-on-year growth.”
Meanwhile, the global chip-manufacturing industry is expected to see record revenues this year, with the stay-at-home economy persisting due to the pandemic, according to Taipei-based market tracker TrendForce.
“This year will be a year for the growth of Samsung’s foundry (chip-manufacturing) business,” Sujeong Lim, an analyst at market observer Counterpoint, told AFP.
“Demand for semiconductors such as 5G, IoT, and high-performance smartphones is exploding.”
But, the firm’s de facto leader, Lee Jae-yong, the late chairman’s son, is awaiting the verdict in his retrial over a sprawling corruption scandal, which could see him return to prison.
The ruling is due later this month, and a conviction could deprive the firm of its top decision-maker after prosecutors requested a nine-year jail term. – AFP, January 8, 2021
