Samsung Electronics expects a global recovery in demand for mobile devices and consumer electronics in the second half after an increase in online activity during the coronavirus pandemic helped boost earnings.

The world’s largest producer of computer chips, smartphones and electronic displays presented the upbeat outlook on Thursday, even as it remained cautious about lingering risks from the health crisis and trade tensions.

The South Korean company reported a 7.2 per cent rise in second quarter net profit to Won5.6tn ($4.6bn) as a rise in internet use during pandemic lockdowns propelled demand for chips. Operating profit jumped 23.5 per cent year on year to Won8.1tn even as sales fell 5.6 per cent to Won53tn in the April to June period.

Samsung expects demand for mobile and graphic memory chips to improve in the second half of the year, helped by new smartphones and game consoles. Operating profit at the semiconductor division, which accounts for two-thirds of its earnings, jumped 60 per cent to Won5.4tn in the second quarter.

High levels of automation at Samsung’s memory chip plants in South Korea and China meant that production suffered little disruption during the health crisis.

“Looking to the second half, overall demand for DRAM is expected to pick up from new smartphone launches, while uncertainties remain around geopolitical issues including trade disputes,” Samsung said on Thursday in reference to the memory chips.

Analysts expect a strong performance in smartphone and display sales in the second half. Samsung plans to launch a new foldable phone and a new Galaxy Note flagship smartphone in August and will also seek to expand sales of cheaper models. Operating profit at its mobile division rose 25 per cent to Won1.95tn in the second quarter. 

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Samsung’s smartphone and telecoms networks business could also benefit from tensions between the US and China, analysts believe. Washington has piled pressure on Huawei, the world’s biggest telecoms network group and one of the largest smartphone producers.

“The trade war is making it more difficult for Huawei to penetrate overseas markets. Samsung will push harder to take advantage of the situation. Some benefits are expected in markets like India,” said Park Kang-ho, an analyst at Daishin Securities.

Samsung shares edged upwards on Thursday to near their highest level in about five months. The shares have jumped in recent sessions on expectations that it may benefit from Intel’s plan to outsource more chip manufacturing.

Intel said last week that it would consider outsourcing more of its production with its new 7-nanometre chip technology six months behind schedule. Samsung has been trying to increase its market share in contract chip manufacturing since announcing plans to invest Won113tn in non-memory chips over the next decade.

“Intel’s outsourcing will cause long-term shortages at [Taiwan Semiconductor Manufacturing Company’s] high-end foundry capacity so Samsung is expected to benefit from this,” said Kim Young-woo, an analyst at SK Securities. TSMC is the world’s biggest contract chipmaker.

 

Via Financial Times