Samsung Marks Nearly 60% Increase in Operating Profit Following Huawei’s Boost


Samsung Electronics marked a nearly 60 percent jump in third-quarter operating profit on Thursday as its mobile device and chip business was boosted by US sanctions against its Chinese rival Huawei.

The South Korean tech giant said in an earnings estimate that it expected operating profit to reach 12.3 trillion won ($ 10.6 billion) from July to September, down from 7.8 trillion won in the same period. from last year.

The forecast would represent the company’s largest operating profit of any quarter for two years and it was also ahead of analysts’ forecasts.

Samsung Electronics is critical to the economic health of South Korea. 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 twelfth-largest economy.

Its total turnover is equivalent to one fifth of the country’s gross domestic product.

James Kang, senior analyst at Euromonitor International Korea, said that Samsung’s launch of its latest premium phone devices, the Galaxy Note 20 and Galaxy Z Fold 2, in August, along with strong sales of mid-range phones, led the third quarter of the company. performance.

Washington’s ban on foreign companies providing US-sourced technology to Huawei, which took effect on September 15, cutting off essential supplies of semiconductors and software needed to make smartphones and 5G equipment, also provided a boost.

Kang Min-soo, an analyst at Counterpoint Research, said that the US sanctions against Huawei were becoming “a major factor” affecting the global smartphone market.

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“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 company’s memory business also profited from the dispute after Huawei scrambled to source semiconductors made by Samsung before the US restrictions went into effect.

“Huawei has stockpiled additional inventory for about six months before the US ban went into effect on September 15,” MS Hwang, an analyst at Samsung Securities, told Bloomberg News.

“Huawei’s purchases are offsetting weak server usage demand and are eating up market inventory, which should affect prices going forward.”

– “New lows” –

But analysts said falling chip prices could dampen Samsung’s performance in the last quarter of the year.

Samsung is the world’s largest memory chip maker and led the DRAM market with a 43.5 percent share between April and June, according to market researcher TrendForce.

Server DRAM chips enjoyed a boost as the pandemic boosted work from home and online classes, but were now experiencing a “significant oversupply,” it said in a report.

“Therefore, contract prices for server DRAM products continue to fall to new lows,” he continued, forecasting a 13-18 percent drop in the fourth quarter.

Despite the optimistic forecast, Samsung Electronics shares closed 0.3 percent lower on Thursday.

Shares of LG Electronics, South Korea’s second-largest home appliance company after Samsung, also closed Thursday, down 2.9 percent, despite forecasting third-quarter operating profit to rise 22. , 7 percent year-on-year to 959 billion won, a record for any quarter.

Samsung is withholding net earnings and sector-by-sector business performance data until it releases its final earnings report, which is expected later this month.

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In addition to the company’s challenges, Vice President and de facto leader Lee Jae-yong is on trial for a sprawling corruption scandal that could lead to his return to prison.

He is not detained during the trial, but a guilty verdict could deprive the firm of his chief decision-maker.


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