Samsung flags nearly 60% operating profit jump
» SAMSUNG Electronics flagged a leap of nearly 60% in third-quarter operating profits, as its mobile and chip business were boosted by U.S. sanctions against its Chinese rival Huawei.
The South Korean tech giant said in an earnings estimate yesterday that it expected operating profit to reach 12.3 trillion won ($10.6 billion) for July to September, up from 7.8 trillion won in the same period last year.
The prediction would represent the firm’s biggest operating profit of any quarter for two years and was also ahead of analyst forecasts.
Samsung Electronics is crucial to South Korea’s economic health. It is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled conglomerates known as chaebols that dominate business in the world’s 12th-largest economy.
Its overall turnover is equivalent to a fifth of the country’s gross domestic product (GDP).
A Washington ban on foreign companies providing Huawei with U.S.-origin technology that came into effect on Sept. 15 – cutting off essential supplies of semiconductors and software needed for making smartphones and 5G equipment – also provided a boost.
Kang Min-soo, an analyst at Counterpoint Research, said U.S. sanctions against Huawei were becoming “a big factor” affecting the global smartphone market. “For Samsung, it will be a good opportunity to increase market share in Europe where it has been competing with Huawei in various price bands,” he added.
The firm’s memory business also benefited from the feud after Huawei rushed to stock up on Samsung-made semiconductors before the U.S. restrictions kicked in. “Huawei has stocked about six months’ worth of extra inventory before the U.S. ban took effect on September 15,” MS Hwang, an analyst at Samsung Securities, told Bloomberg News. “Huawei’s purchases are offsetting weakness in server-use demand and are devouring market inventory, which should affect prices down the road.”
But analysts said falling chip prices could put a damper on Samsung’s performance in the final quarter of the year.
Samsung is the world’s biggest manufacturer of memory chips and led the DRAM market with a 43.5% share in April-June, according to market researcher TrendForce.
Samsung withholds net profit and sector-by-sector business performance data until it releases its final earnings report, expected later this month.