Samsung says Q3 profit likely rose 58% on strong phone sales

Samsung Electronics said yesterday that its operating income for the third quarter was likely 12.3 trillion won (S$14.5 billion), beating the 10 trillion won average of estimates.
Samsung Electronics said yesterday that its operating income for the third quarter was likely 12.3 trillion won (S$14.5 billion), beating the 10 trillion won average of estimates. PHOTO: EPA-EFE

SEOUL • Samsung Electronics flagged earnings that beat analyst estimates after the South Korean tech giant's mobile and chip businesses benefited from US restrictions on Huawei Technologies.

The world's largest manufacturer of memory chips and personal electronics said yesterday that its third-quarter operating profit likely jumped 58 per cent. A recovery in smartphone sales and a rush order of chips from Huawei offset the effects of weak memory chip prices.

Operating income was likely 12.3 trillion won (S$14.5 billion) in the three months ended September, beating the 10 trillion won average of estimates. It would be the highest since the 17.57 trillion won of the third quarter of 2018.

Samsung did not provide net income or break down divisional performance, which it will report later this month when it releases its final results. It released only limited data in the regulatory filing yesterday.

Revenue for the quarter likely rose 6 per cent from the same period a year earlier to 66 trillion won, said the company.

"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 head of research C. W. Chung at Nomura in South Korea.

Samsung's share price rose 1.2 per cent in morning trade, outperforming the benchmark Kospi's 0.7 per cent rise.

The firm's smartphone shipments jumped to about 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 this year, analysts said.

While weaker memory prices pressured Samsung's overall chip business, said analysts, shipments had a boost from orders for graphic chips for games consoles and orders for mobile chips, including from Huawei.

The Chinese smartphone maker had been building stockpiles before US restrictions from the middle of last month prevented it from buying chips made using US technology without a licence, industry sources said.

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

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 09, 2020, with the headline 'Samsung says Q3 profit likely rose 58% on strong phone sales'. Print Edition | Subscribe