SEOUL: South Korean tech giant Samsung Electronics flagged a jump of more than a quarter in fourth-quarter operating profit on Friday (Jan 8), with working from home under the coronavirus pandemic driving demand for the devices powered by its chips.
The world’s biggest manufacturer of smartphones and memory chips said in an earnings estimate that it expected operating profit of 9 trillion won (US$8.23 billion) for October to December, up from 7.16 trillion won a year earlier.
The prediction was slightly short of analyst forecasts of 9.34 trillion won compiled by market researcher FnGuide.
The figures come about two months after the burial of late chairman Lee Kun-hee – who turned Samsung Electronics into a global powerhouse – and as the coronavirus wreaks havoc with the world economy.
But the pandemic has also seen many tech companies boom, while South Korea saw a return to quarter-on-quarter growth in the third quarter last year, driven by a better-than-expected exports performance.
But Samsung’s operating profit and 61 trillion won sales forecast were both lower than its third-quarter figures, when its mobile and chip businesses were boosted by US sanctions against Huawei.
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 national gross domestic product.
Looking forward, analysts said the firm’s outlook for 2021 was fairly stable, driven by continued demand for memory and growth in the consumer electronics and chip-manufacturing businesses.
They also expected Samsung’s mobile business to improve, with the firm unveiling its latest lineup of flagship Galaxy flagship phones next week.
“Despite the pandemic, in Q1-Q3 2020 Samsung’s mobile sales were down only modestly by five percent year-on-year,” said Gloria Tsuen, the senior credit officer at Moody’s Investors Service.
“For 2021, hopefully with the pandemic situation to moderate, the company can generate some year-on-year growth.”
Meanwhile, the global chip-manufacturing industry is expected to see record revenue this year, with the stay-at-home economy persisting due to the pandemic, according to Taipei-based market tracker TrendForce.
“2021 will be a year for the growth of Samsung foundry (chip-manufacturing) business,” Sujeong Lim, an analyst at market observer Counterpoint, told AFP.
“Demand for semiconductors such as 5G, IoT, and high-performance smartphones is exploding.”
But the firm’s de facto leader Lee Jae-yong, the late chairman’s son, is awaiting the verdict in his retrial over a sprawling corruption scandal, which could see him return to prison.
The ruling is due later this month and a conviction could deprive the firm of its top decision-maker after prosecutors requested a nine-year jail term.