SEOUL – South Korean tech giant Samsung Electronics today flagged a 44.19% rise in its first-quarter operating profits, largely driven by the robust sales of smartphones and the launch of its flagship Galaxy S21 series.
The company in an earnings estimate said it expects operating profits of 9.3 trillion won (RM34.25 billion) for January to March, up from 6.45 trillion won a year earlier.
Similarly, LG Electronics, South Korea’s second-largest appliance firm after Samsung, has forecast a 39.2% jump in operating profits for the same period to 1.5 trillion won.
“Both quarterly revenue and operating profits are the highest in the company’s history,” the firm said in a statement.
Samsung Electronics is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled empires known as “chaebols” that dominate business in South Korea, the world’s 12th largest economy.
It is crucial to the country’s economic health – the conglomerate’s overall turnover is equivalent to a fifth of the national gross domestic product.
The coronavirus has wreaked havoc on the world economy, with lockdowns and travel bans imposed around the globe for many months.
But the pandemic, which has killed more than 2.8 million people worldwide, has also seen many tech companies boom.
Covid-19-driven work-from-home arrangements have boosted demand for devices powered by Samsung’s chips, as well as home appliances like TV and washing machines.
Analysts said the company has had a particular boost from rolling out its Galaxy S21 series in January, more than a month ahead of the flagship product’s usual annual launch schedule.
“Key to the success of this latest flagship has been its lower US$799 (RM3,297) starting price,” said tracker Counterpoint Research in a report.
“Lower cost, coupled with trade-in offers that essentially make the S21 device free, is helping increase demand for these ‘entry-level’ flagships.”
Jailed leader
The global chip-manufacturing industry had been expecting to see record revenue this year, with the stay-at-home economy persisting, according to Taipei-based market tracker TrendForce.
However, power outages across Texas in the United States – caused by a severe winter storm – shut down semiconductor factories clustered around Austin in February, including Samsung’s.
Samsung said operations at its factory returned to almost normal late last month, but South Korea’s Yonhap news agency reported that the company may suffer around 400 billion won in losses due to the shutdown.
Still, Hi Investment and Securities here said Samsung’s Q1 performance will greatly benefit from its mobile business, backed by solid shipments and cost control.
The tech giant is expected to have produced around 62 million smartphones in the quarter, with a market share of 18.1%, according to TrendForce.
With the estimates, Samsung is expected to reclaim its global smartphone market lead, said the tracker, after losing the spot to Apple in Q4 last year.
“For the whole of 2021, TrendForce expects Samsung to top the annual ranking” of smartphone brands by production, it said.
But, Samsung’s de facto leader, Lee Jae-yong, was jailed in January over a sprawling corruption scandal that brought down former South Korean president Park Geun-hye.
That ruling raised uncertainty about succession at the giant company after the death last October of Jae-yong’s father, Lee Kun-hee, the chairman who turned Samsung Electronics into a global powerhouse.
Experts said a leadership vacuum could hamper the firm’s decision-making on future large-scale investments, which have been key to its rise.
LG Electronics shares were up 0.63% today.
Earlier this week, the company said it is closing down its mobile phone business, after the division lost billions in recent years. – AFP, April 7, 2021
