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(LEAD) Samsung Electronics delivers forecast-beating Q1 performance on robust chip demand

All News 09:19 April 07, 2020

(ATTN: RECASTS headline; UPDATES lead, 2nd para; ADDS more info from 7th para)
By Joo Kyung-don

SEOUL, April 7 (Yonhap) -- Samsung Electronics Co. on Tuesday delivered better-than-expected first-quarter earnings as robust demand for chips apparently offset a slump in smartphone sales and home appliances amid the novel coronavirus pandemic.

The South Korean tech giant put its first-quarter operating profit at 6.4 trillion won (US$5.2 billion) for the January-March period, up 2.73 percent from 6.23 trillion won a year ago.

It beat the market consensus of 6.19 trillion won in operating profit in the survey conducted by Yonhap Infomax, the financial arm of Yonhap News Agency, on 20 Korean brokerage houses.

In its earnings guidance, Samsung Electronics expected its first-quarter sales at 55 trillion won in the three-month period, up 4.98 percent from a year earlier. The figure was in line with the median estimate of 55.3 trillion won.

This photo taken March 11, 2020, shows a corporate logo of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

Samsung, the world's leading memory chip and smartphone vendor, did not break down performances of its respective business divisions, saying it will announce the detailed earnings later this month.

Analysts here said Samsung's semiconductor business may have helped the company stay afloat amid the novel coronavirus crisis on the back of increased demand for server chips for data centers and steady rise of memory chip prices.

"Increased non-face-to-face activities prompted by the COVID-19 outbreak has led to a surge in data traffic and server expansion," Kim Dong-won, an analyst at KB Securities, said. "It pushed up the average selling prices of memory chips."

According to industry tracker DRAMeXchange, the average contract price of 8-gigabit DDR4 DRAM, a benchmark price for the category, reached $2.94 in March, up 2.1 percent from a month earlier, extending its price hike to a third consecutive month.

The average contract price of 128-gigabit 16Gx8 MLC NAND flash was $4.68 last month, up 2.63 percent from a month ago, according to DRAMeXchange.

Analysts here expected Samsung's chip business to have logged around 4 trillion won in operating profit in the first quarter.

This photo taken Feb. 20, 2020, shows Samsung Electronics Co.'s Galaxy S20 smartphones at a store in Seoul. (Yonhap)

But smartphone and home appliance sales might have slumped in the face of weak demand amid the COVID-19 outbreak around the globe, they said.

Samsung had to temporarily shut down about one-fourth of its global manufacturing bases, including those in India, Brazil and Russia, amid the spread of COVID-19.

Last month, it even shifted some of its premium smartphone production from South Korea to Vietnam.

Samsung also had to close its home appliance outlets in North America and other countries and asked consumers to use online shops for purchases.

"Samsung is expected to have shipped only 60 million smartphones in the first quarter, down from 72 million units a year ago, as the global situation of COVID-19 worsened quickly in March," Lee Soon-hak, an analyst at Hanwha Investment & Securities, said. "The sales slump of Galaxy S20 smartphones is also one of the main reasons behind the poor performance."


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