Samsung Electronics estimated a 53.37 percent increase in second-quarter operating profit on Wednesday (July 7) thanks to robust chip pricing and the resumption of operations at a key US factory after a closure. In an earnings projection, the world’s largest smartphone maker predicted an operational profit of roughly 12.5 trillion won (US$11 billion) for April to June, up from 8.15 trillion won a year earlier.
The company’s earnings forecast for the second quarter of this year exceeded experts’ expectations of a 38 percent increase.
READ: Strong chip prices are expected to boost Samsung Electronics’ Q2 profit by 38 percent: Analysts Samsung Electronics is the flagship company of the Samsung Group, which is by far the largest of the chaebols (family-controlled conglomerates) that rule South Korea, the world’s 12th largest economy. The conglomerate’s total revenue is equal to a fifth of the country’s gross domestic product.
The coronavirus has wrecked havoc on the global economy, resulting in months of lockdowns and travel bans around the world.
However, the pandemic, which has killed an estimated 4 million people worldwide, has resulted in a surge in many tech businesses.
Working from home due to the Coronavirus has boosted demand for Samsung processors, as well as home equipment like TVs and washing machines.
Memory chip pricing hikes, according to analysts, have given the company a boost.
As the “serious undersupply scenario remains,” Taipei-based market researcher TrendForce predicted last month that prices of memory chips, particularly DRAM – widely used in servers and mobile phones – will rise until the third quarter of this year.
According to Tom Kang, a research director at market researcher Counterpoint, Samsung’s earnings “will remain healthy, mostly due to higher demand for memory chips and rising DRAM pricing.”
READ: Samsung places a bet on 5G orders in Europe to expand its network equipment business
SHUTDOWN OF THE FACTORY
In February, power disruptions across Texas, caused by a major winter storm, forced the closure of semiconductor manufacturers centered near Austin, including Samsung’s.
According to the Yonhap news agency in South Korea, the company lost more than 300 billion won as a result of the ban.
The manufacturing line in Texas, however, was “completely normalized in the second quarter,” according to Samsung, and Kim Woon-ho, an analyst at IBK Investment & Securities, said the factory’s resumption was favorable for April to June earnings.
However, sales of the company’s latest flagship product, the Galaxy S21 series, which launched in January, are expected to have slowed, resulting in a decline in smartphone shipments.
According to a study, “it is expected that Samsung’s mobile production lines in Vietnam and India did not work effectively owing to COVID-19 lockout.”
READ: Samsung’s semiconductor production in Texas has returned to near-normal levels
Moody’s Investors Service Vice President Gloria Tsuen expressed optimism for the company’s second half of the year. “Semiconductors will continue to be Samsung’s main source of revenue,” she told AFP. However, the corporation is up against legal issues. Lee Jae-yong, the group’s de facto head, is currently on trial for allegedly engineering a takeover to ensure his ascension to the top of the Samsung group. In January, Lee was sentenced to prison for his role in the massive corruption scandal that drove former President Park Geun-hye down. Corporate executives in South Korea and some academics believe that a leadership vacuum could stymie the firm’s decision-making on future large-scale investments, which were previously critical to its worldwide expansion./n
