Samsung Electronics sees profit decline on weaker chip demand after strong Q3 earnings

Joyce Lee and Hyunjoo Jin, Reuters

Posted at Oct 29 2020 08:48 AM | Updated as of Oct 29 2020 09:49 AM

Samsung Electronics sees profit decline on weaker chip demand after strong Q3 earnings 1

SEOUL - Samsung Electronics Co Ltd said on Thursday it expects profits to fall in the current quarter after posting its highest operating profit in two years for the third quarter.

The world's top maker of smartphones and memory chips posted a 59 percent jump in operating profit in the July-September quarter, on the back of its second-largest quarterly smartphone profit ever at 4.45 trillion won, the company said.

A near 50 percent jump in sales of smartphones likely reflects gains in Samsung's share of the market as U.S. restrictions hit Chinese rival Huawei Technologies Co Ltd, analysts said.

Lower marketing costs amid the coronavirus pandemic were also a likely factor, analysts said.

Samsung said its chip profit surged 82 percent to 5.54 trillion won in the third quarter from a year earlier, as higher sales of low- and mid-end smartphones and inventory buildup from Huawei ahead of U.S. sanctions offset weak demand from servers. 

Operating profit in the third quarter was 12.35 trillion won ($10.96 billion) from 7.78 trillion won a year earlier, in line with the company's estimate earlier this month. 

Revenue climbed 8 percent to 66.96 trillion won. Net profit rose 49 percent to 9.36 trillion won.

But in the current quarter, overall memory chip prices are expected to remain weak as oversupply and a lack of recovery in server demand continues, said Avril Wu, analyst at researcher TrendForce.

Samsung's smartphone shipments in the current quarter are expected to drop about 5 percent compared to the third quarter due to competition from Apple's newest iPhone 12 and a lack of new Samsung flagship models, analysts said.

Samsung's shares fell 1.4 percent in early trade on Thursday, compared to the wider market's 1.3 percent fall.

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