Samsung forecasts 23% jump in second-quarter operating profit on chip sales

The South Korean company aims to begin mass production of chips from its Pyeongtaek assembly line by the second half of next year

Samsung will announce its detailed financial results later this month. Reuters
Samsung will announce its detailed financial results later this month. Reuters

Samsung Electronics projected a 23 per cent year-on-year growth in second-quarter profit on the back of increased chip sales, even as the coronavirus pandemic disrupted global supply chains.

The world’s biggest smartphone and memory chip manufacturer said on Tuesday that operating profit in the three months to June could rise to 8.1 trillion Korean won (Dh24.9 billion/$6.8bn).

This would be its highest quarterly profit since the fourth quarter of 2018.

Earlier, data provider Refinitiv forecast that Samsung’s operating profit would fall by more than 3 per cent to 6.4tn won.

Second-quarter sales are projected to have declined by 7.3 per cent year on year to 52tn won, about 4.1tn won less than during the same period last year.

Samsung did not disclose its net profit or provide details of how its divisions performed. It is expected to provide detailed financial results later this month.

The company said its operating profit includes a “one-time gain related to the display business”, which counts iPhone manufacturer Apple as a customer. It did not disclose any further details.

The global memory chip market received a boost this year as countries enforced movement restrictions and more people worked from home to contain the spread of the coronavirus pandemic.

Samsung registered strong chip sales over the past few months, propelled by increasing demand from laptop manufacturers and data centres, which use chip technology to enhance their storage capabilities.

The company is also working to increase its memory chip production capacity to meet growing demand. It began expanding the assembly line in Pyeongtaek last month, with production on the new line expected to start in the second half of next year.

“The new investment reaffirms our commitment to sustain undisputed leadership in memory technologies, even in uncertain times,” Cheol Choi, executive vice president of memory sales and marketing at Samsung, said.

The company's smartphone business was affected by the pandemic as consumers stopped spending on non-essential products, analysts said.

Samsung's smartphone sales declined by 22.7 per cent year on year to 55.3 million units in the first quarter.

Anshul Gupta, senior research analyst at Gartner, said the decline could have been much worse.

“Its limited presence in China and the location of its manufacturing facilities outside of China prevented a steeper fall.”

To attract more customers, Samsung launched two new 5G-enabled phones in its budget-friendly Galaxy A series, in April. The new phones cost between $500 and $600 (Dh1,837 and Dh2,204).

Updated: July 8, 2020 02:10 AM

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