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Summary
- Samsung Electronics on 8 October 2020 revealed that the Company’s profit for the third quarter is likely to be up by 58% as compared to the last year.
- The Company possibly got the boost because of the rising demand for chips during the covid-19 pandemic
- The Company also announced that the operating profit for the past three months stood at 12.3 trillion Korean won which is around $10.6 billion.
The recent economic history has it that during the slowdown induced by Covid-19 pandemic, numerous companies including many consumer electronics companies suffering huge losses. But the slowdown and the lockdowns were unable to hamper the growth of one conglomerate, Samsung Electronics Co. Ltd (KRX:005930).
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On 8 October 2020, Samsung Electronics forecasted that its operating profit for the third quarter would be approximately 12.3 trillion won or $10.6 billion, a 58% rise compared to the year ago. Last year, it was 7.78 trillion won. The Company also said that its overall revenue has increased by 5% to reach 66 trillion won or $57 billion.
The 2020 third quarter is expected to experience a bounce compared to last year corresponding period when the Company suffered a setback with 56% decline in its operating profit.
Samsung recorded a bounce of approximate 23% in its operating profit to reach 8.1 trillion won ($7 billion) in the previous quarter featuring the months between April to June.
Samsung is expected to announcing its final business figures for this quarter at the end of this month.
Reason likely behind the growth
Samsung electronics is said to have risen because of the surge in the demand for the storage chips that it manufactures. The Company is the largest seller when it comes to mobile phones and even Television sets. Besides, it also manufactures memory chips for other companies. During the pandemic, as most of the people were working from their homes, the data centres were dependent on these chips to store the data. The spurt in the demand for these chips rose during the covid-19 lockdowns, thereby boosting the Company’s growth.
On the other hand, the main business for what Samsung is known for – the ‘phone’ business, incurred a little slump.
Is Huawei’s loss Samsung’s gain?
Industry experts also believe that Huawei Technologies has lost a significant demand outside China for its phones post restriction imposed by the US. Huawei’s loss has provided Samsung an advantage to gain more revenues, consequently more market share. However, restriction on Huawei also means Samsung losing over 3% of its sales as Huawei is its second largest customer in semiconductors. Apple is the largest customer in semiconductors. The restriction drove Huawei to place order for additional chips from Samsung post Washington inhibited its access to commercially obtainable chips from September mid.
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Industry analysts further believes that Huawei has experienced business loss in the European market with sales from the region declined for the quarter ending June. In the same quarter, companies such as Samsung and Xiaomi have garnered double digit growth.
Samsung has also launched its second generation foldable smartphones in various regions including Taiwan. However, Huawei's smartphone which are foldable are only available in China.
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Bottomline
The year of 2020 was anticipated to be a great year for the entire mobile business, but the covid-19 scare, and other economic strains restricted companies to deliver their goals of the year.
Samsung’s share price went up to 1.2% in the morning hours but recorded bearish movement during the day trade. On 8 October, the stock closed at 59,700 KRW, down by 0.33% from the previous close at the KRX (Korea Exchange).
