Samsung Says Solid Chip Sales Helped Cushion Blow of Smartphone, TV Drops

Samsung Electronics mentioned on Tuesday its first-quarter working revenue probably managed to rise barely from a hunch a yr earlier, as stable chip gross sales helped cushion the blow from the coronavirus pandemic on smartphones and TVs.

The world chief in semiconductors is benefiting from increased demand for chips from laptop computer makers and knowledge centres amid the coronavirus-driven shift to working from dwelling.

But on the identical time the South Korean tech large can be anticipating a much bigger hit to its cell and shopper electronics gross sales within the present quarter because the novel coronavirus sweeps by way of Europe and the United States – key markets for its premium smartphones and TVs.

Samsung mentioned working revenue was anticipated to be KRW 6.four trillion ($5.2 billion) within the quarter ended March, in contrast with KRW 6.2 trillion a yr in the past and the KRW 6.2 trillion estimate from analysts in response to Refinitiv SmartEstimate.

Revenue probably rose 5 p.c to 55 trillion gained from a yr in the past, consistent with the 55.6 trillion gained estimate.

Samsung Electronics shares had been up 1.6 p.c in morning commerce, in comparison with a 1.Three p.c rise of the broader market.

The maker of smartphones, TVs, home equipment, reminiscence chips and shows is the primary world tech firm to report its January-to-March quarter earnings estimates.

Samsung Electronics mentioned in March the coronavirus pandemic would harm gross sales of smartphones and shopper electronics this yr, whereas demand from knowledge centres would gasoline a restoration in reminiscence chip markets.

The first-quarter outcomes are smaller than Samsung’s inner forecast from early March, and the corporate is anticipating a much bigger hit from the virus within the second quarter, an individual accustomed to Samsung’s operations mentioned.

“Even though Samsung’s mobile business was hit by the coronavirus outbreak this quarter, it will likely face bigger challenges in the second quarter – now that the United States and Europe have become the hardest-hit countries,” Kim Sun-woo, an analyst at Meritz Securities, mentioned.

Hana Financial Investment just lately lower its forecast for Samsung’s smartphone shipments to 260 million, from an preliminary forecast of 300 million as a result of of slower demand for its high-end smartphones, which can even erode its cell margins.

Taiwan’s Foxconn, a key provider of Apple Inc’s merchandise, mentioned on Monday that its January-March income declined 12 p.c from the earlier yr, after Apple warned it was unlikely to fulfill its March-quarter gross sales steerage.

When the outbreak first began in China final yr, Samsung’s technique of spreading out its manufacturing base to international locations together with Vietnam and India appeared to repay as provide disruptions in China hit rivals comparable to Apple.

But because the virus unfold throughout the globe, Samsung too has needed to shut factories and retail shops in Europe, India and the United States.

Chip buffer
The firm didn’t present a breakdown on anticipated earnings for every division in its steerage launched on Tuesday.

Analysts say the corporate’s reminiscence chip enterprise, which generated greater than 50 p.c of its working revenue in 2019, would probably report better-than-expected leads to the primary quarter.

Memory chip costs are rising as work-from-home necessities increase demand from the information centres that assist Internet companies comparable to streaming and cloud computing, analysts have mentioned.

Prices for DRAM reminiscence chips are up greater than 3.5 p.c since January, in response to business tracker DRAMeXchange.

Many analysts had anticipated Samsung to rebound strongly from its worst working revenue in 4 years in 2019, however the pandemic has pressured some to decrease their earnings estimates for this yr on account of stress on smartphone gross sales.

A extra extended coronavirus disaster might additionally spill over into the chip sector, analysts say.

© Thomson Reuters 2020

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