amsung Electronics Flags econd-Quarter Profit Jump on olid Chip Demand, One-Off Gains From Apple

amsung Electronics flagged a 23 percent rise in second-quarter operating profit on Tuesday, beating analysts’ estimates on solid chip sales to data centres catering for a work-from-home economy during the coronavirus pandemic.

The sales offset weak demand for smartphones and TVs, while one-off gains from its display business, which counts Apple as a customer, also boosted profits, the company said. It gave no further details.

The world’s top memory chip and smartphone maker said operating profit was likely KRW 8.1 trillion (roughly Rs. 50,708 crores) in the quarter ended June, far above the KRW 6.4 trillion (roughly Rs. 40,058 crores) analyst forecast by Refinitiv martEstimate. It would be the highest quarterly profit since the fourth quarter of 2018.

Revenue likely fell 7 percent to KRW 52 trillion (roughly Rs. 3.25 lakh crores) from a year earlier, amsung added, giving only limited data in a regulatory filing ahead of its full earnings figures later this month.

Work-from-home orders and growth in online learning are underpinning chip demand amid the COVID-19 pandemic and pushing up DRAM memory chip prices. U DRAM supplier Micron Technology forecast strong quarterly revenue last month.

“Chip demand was stronger than expected due to the COVID-19,” said Park ung-soon, an analyst at Cape Investment & ecurities.

Analysts said the one-off display boost reflected a payment from Apple, with the U smartphone maker struggling to meet agreed shipment targets as iPhone sales take a hit from the COVID-19 pandemic.

The payment was estimated at KRW 1 trillion (roughly Rs. 6,260 crores), bigger than a similar KRW 800 billion (roughly Rs. 5,009 crores) payment a year ago, they said.

The handset and TV business may have also fared better than expected due to lower marketing costs and as stores and factories resumed operations worldwide as countries lifted lockdowns, analysts said.

“The damage from the pandemic was less severe than the market had expected,” said CW Chung, Nomura head of research in Korea.

Analysts, however, warned that increases in memory chip prices may not continue in the second half of the year as data centre customers are likely to be conservative in stockpiling chips given the resurgence of COVID-19 cases in the United tates and other countries

While prices jumped 14 percent on average in the quarter, they were flat in June versus May, data from DRAMeXchange showed.

hares of amsung Electronics fell 1.8 percent, versus a 0.4 perceny fall in the wider market as of 0206 GMT (7:36 am IT).

The outh Korean tech giant’s resilient earnings despite the pandemic came even as its leader Jay Y Lee faces fresh legal troubles. tate prosecutors are investigating Lee on suspicions of resorting to accounting fraud and stock price manipulation to win control of amsung Group, Korea’s largest conglomerate. Lee’s attorneys have denied such allegations.

© Thomson Reuters 2020


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