Samsung Electronics profit likely at 2-year high after Huawei chip orders, phone recovery

Joyce Lee and Hyunjoo Jin, Reuters

Posted at Oct 08 2020 08:57 AM

SEOUL - Samsung Electronics Co Ltd's third-quarter profit likely jumped 58 percent to its highest in two years, beating estimates from analysts who pinned the rise on smartphone sales recovery and a rush order of chips from Huawei Technologies Co Ltd.

The South Korean tech giant said on Thursday operating profit was likely 12.3 trillion won ($10.6 billion) for the three months ended September. That compared with a Refinitiv SmartEstimate of 10.5 trillion won and would be the highest since the 17.57 trillion won of the third quarter of 2018.

Revenue likely rose 6 percent from the same period a year earlier to 66 trillion won, the company said.

Samsung released only limited data in Thursday's regulatory filing ahead of the release of detailed earnings figures later this month.

"It seems Huawei's impact on Samsung's chip business was bigger than the market expected, and there was a big surprise in the smartphone and home appliance businesses," said CW Chung, head of research at Nomura in Korea.

Samsung's share price rose 1.2 percent in morning trade, outperforming the benchmark KOSPI's 0.7 percent rise.

The firm's smartphone shipments jumped to around 80 million handsets from 54.2 million in the previous quarter after demand rebounded from a contraction brought about by the COVID-19 pandemic in the first half of 2020, analysts said.

While weaker memory prices pressured Samsung's overall chip business, analysts said shipments got a boost from orders for graphics chips for games consoles as well as orders for mobile chips, including from Chinese smartphone maker Huawei.

Huawei had been building stockpiles before U.S. restrictions from mid-September prevented it from buying chips made using U.S. technology without a license, industry sources have said. 

Samsung's home appliance business also likely got a lift from the pandemic which spurred consumers to spend more on products that make their homes cleaner, analysts said.