Samsung Electronics forecast solid fourth-quarter earnings as its chip business stayed afloat in the face of the weakness of the U.S. dollar and the resurgence of coronavirus to cover mediocre performance in its mobile business, Yonhap news agency reported.
The South Korean tech giant, in its earnings guidance, estimated its operating profit at 9 trillion won or US$8.2 billion for the October-December period in 2020, up 25.7 percent from a year ago.
Samsung projected its fourth-quarter sales at 61 trillion won in the three-month period, up 1.87 percent from a year earlier.
On a quarter-on-quarter basis, Samsung’s fourth-quarter estimate was down from its superb performance in the third quarter, when it racked up record sales of 66.9 trillion won and operating profit of 12.3 trillion won on the back of pent-up demand.
Analysts said the weaker U.S. dollar and lockdowns in European nations may have dragged down Samsung’s fourth-quarter earnings from the previous quarter.
For the whole of 2020, Samsung expected its operating profit to reach 35.95 trillion won, up 29.4 percent from a year earlier, with its sales to climb 2.54 percent on-year to 236.26 trillion won.
Samsung, the world’s leading memory chip and smartphone vendor, did not break down performances of its respective business divisions, saying it will announce the detailed earnings later this month.
Analysts have been cutting their forecasts for Samsung’s fourth-quarter earnings due to the strong Korean won. The local currency closed at 1,086.3 won against the U.S. dollar on Dec. 30, compared to 1,169.40 won on Sept. 29.
Despite a drop in prices of memory chips, analysts believe Samsung’s semiconductor business has racked up an operating profit of more than 4 trillion won to lead the company’s performance in the fourth quarter.
DRAM and NAND flagship shipments are expected to post around 10 percent quarter-on-quarter growth and are likely to beat the company’s estimate announced earlier, said Pak Yu-ak, an analyst at Kiwoom Securities.
Samsung’s mobile businesses sales fell due to lockdowns in Europe over COVID-19 infections and the release of Apple Inc.’s iPhone 12, according to analysts.
Analysts expect Samsung’s mobile unit to post an operating profit of around 2.3 trillion won in the last three months of 2020.
“Samsung’s smartphone shipments in the fourth quarter are estimated to fall by 20 million units from the previous quarter, so a revenue drop is inevitable,” said Lee Seung-woo, analyst at Eugene Investment Securities.
Samsung’s consumer electronics (CE) business unit was also widely believed to have been hit by lockdowns in Europe, while the increase of marketing costs for the year-end holidays may have also affected its earnings, according to analysts.
They expected the CE division to log around 800 billion won in operating profit in the fourth quarter.
Samsung’s display business was expected to have posted robust earnings in the fourth quarter, with operating profit reaching around 1.5 trillion won, as its mobile OLED panel supply was to benefit from brisk sales of Apple’s iPhone 12.
Analysts said Samsung is likely to rack up strong earnings in 2021 as its chip business is expected to enter a “super cycle” with the rise of DRAM prices and increased demand for its foundry business.