Samsung Electronics forecast its operating profit to increase by a quarter in the last three months of 2020, as increased online activity during the coronavirus pandemic spurred demand for computer chips and electronic displays .
The surge in consumer appetites during the pandemic has pushed the South Korean tech group’s annual results beyond analysts’ expectations. Many now see this momentum continuing into 2021, with chip prices is expected to rebound in the current quarter.
“Its profits will be much better this year thanks to the recovery in chip prices,” said Kim Young-woo, analyst at SK Securities. He added that the demand for Dram chips, which allow mobile devices to multitask, could benefit as Samsung does not plan to significantly increase their supply this year.
The world’s largest producer of memory chips, smartphones and flat screens estimated on Friday that its operating profit rose 25.7% to Won9tn ($ 8.2 billion) between October and December of the year last, with sales likely to increase 2% year on year at Won61tn. Profit was slightly lower than forecast for Won9.5tn by analysts polled by Refinitiv.
Strong demand for chips and flat screens, helped by a move towards working from home and online learning, offset the decline in smartphone sales. Operating profit for the whole of 2020 is expected to have jumped 30% at Won36.3tn, according to Samsung, while sales would have increased 2.5% at Won236.3tn.
Samsung shares rose 2% early in Seoul on Friday to hit a record high. The group’s share has risen 57% since September, pushing its market value to Won504tn, on better prospects for its semiconductor and foundry businesses.
Semiconductors accounted for nearly half of its operating profit during the October to December period, analysts said, as memory chip shipments rose about 10% from the previous quarter. Drama prices fell 9% in the fourth quarter, according to market research TrendForce, but analysts expect them to recover in the coming months.
“The operating profit of the memory chip business will increase sharply this year as the pace of the economic cycle recovery appears to be faster than expected,” Kim Un-ho, analyst at IBK Securities, said in a recent report. .
Samsung’s smartphone sales fell in the fourth quarter due to the popularity of its rival Apple iPhone 12, but the launch of a new flagship model next week should boost first quarter deliveries.
Strong demand for the iPhone 12 has also boosted sales of Samsung’s OLED panels, which are used in Apple devices. Its LCD business benefited record request for televisions, which prompted the company to reconsider last year’s announcement that it would cease production of the screens.
Investors believe the wider electronics boom will continue into 2021, with LCD prices remaining firm in the first half of the year.
However, Samsung faces uncertainty about its leadership. South Korean prosecutors are looking for a nine years in prison for Lee Jae-yong, vice president of Samsung, who faces a retrial for corruption. The Seoul High Court is expected to deliver a ruling on the long-standing case later this month.
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