Samsung expects chip rally, shrinking phone market

An employee (far left) attending to customers at Samsung Electronics' D'light flagship store in Seoul earlier this month. Samsung expects the coronavirus pandemic to hurt sales of smartphones and consumer electronics this year.
An employee (far left) attending to customers at Samsung Electronics' D'light flagship store in Seoul earlier this month. Samsung expects the coronavirus pandemic to hurt sales of smartphones and consumer electronics this year.PHOTO: BLOOMBERG

SEOUL • Samsung Electronics said yesterday that the coronavirus pandemic would hurt sales of smartphones and consumer electronics this year, while demand from data centres would fuel a recovery in memory chip markets.

Chief executive Kim Ki-nam said the coronavirus and United States-China trade disputes were casting a shadow over the outlook for the South Korean tech giant, whose Galaxy smartphones vie with Apple's iPhones for global dominance.

"The global smartphone market was expected to turn to growth this year, but with the virus showing signs of being prolonged, the smartphone market is contracting. But 5G smartphone demand is expected to rise," Mr Koh Dong-jin, president of Samsung's mobile and network business, told the annual general meeting in Seoul.

While the smartphone market would shrink, Mr Kim said the chip market, which makes up about half of Samsung's operating profit, would see demand growth after a slump last year exacerbated by excess supply and US-China trade tensions.

Other chipmakers like Broadcom have either cut or pulled their sales outlook due to disruptions caused by the coronavirus outbreak, but global leader Samsung said it expected investments from data centre firms and new opportunities in areas such as 5G wireless networks and cars to drive chip sales higher this year.

At the same time, Mr Kim said he expected chipmakers to focus on upgrading manufacturing processes rather than expanding capacity this year, limiting supply.

Samsung's annual general meeting drew a crowd of only about 400 shareholders this year, sharply down from about 1,000 last year, as South Korea battles the biggest coronavirus outbreak in Asia outside China.

Investors were scanned with thermal cameras and checked with thermometers as they arrived, and sat two seats away from each other as part of measures to ensure the meeting could go ahead safely.

Samsung also adopted electronic voting for the meeting and encouraged shareholders to cast their votes online.

Mr Kim Hyun-suk, the company's consumer electronics chief, said it was too early to predict how the virus would impact consumers.

BAD AND GOOD NEWS

The global smartphone market was expected to turn to growth this year, but with the virus showing signs of being prolonged, the smartphone market is contracting. But 5G smartphone demand is expected to rise.

MR KOH DONG-JIN, president of Samsung's mobile and network business.

"We had expected the consumer electronics market to rise slightly this year, but with the coronavirus fast spreading, uncertainties are growing faster than ever, and it is very difficult to predict the future," he said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 19, 2020, with the headline 'Samsung expects chip rally, shrinking phone market'. Print Edition | Subscribe