Samsung expects its Q1 operating profit to beat analysts’ estimates on solid chip sales

Samsung expects its Q1 operating profit to beat analysts’ estimates on solid chip sales

  • Samsung says its Q1 operating profit is likely to be stronger than the same quarter last year.
  • The company saw an increase in chips demand from data centres and laptop manufacturers in Q1.
  • The smartphone maker expects a 5% increase in revenue to £37 billion in the first quarter.

Samsung Electronics (KRX:005930) announced on Tuesday that its profit in the first quarter likely increased slightly as compared to last year. The company attributed the upbeat estimate to greater than expected chip sales that helped offset the effect of the Coronavirus pandemic on the sales of its TV sets and smartphones.

With businesses switching to work-from-home arrangements due to the ongoing health emergency, data centres and laptop manufacturers pushed the demand of Samsung’s chips higher in Q1. Its consumer electronics business including smartphones, however, continues to suffer because of the health crisis.

Samsung Expects £4.3 Billion In Q1 Operating Profit

The South Korean multinational conglomerate anticipates £4.3 billion in Q1 operating profit. The figure was capped at a lower £4.2 billion in the same quarter last year. According to Refinitiv, analysts forecast the company to again record an operating profit of £4.2 billion in the quarter that ended in March.

In terms of revenue, the company said that a 5% quarterly increase is expected as compared to last year’s Q1. The company expects to generate £37 billion in revenue in the first quarter that almost matches the experts’ estimate.

Samsung Electronics posted a 2.3% increase in the stock market on Tuesday while the broader .KS11 index was reported 1.9% up.

In a statement in March, Samsung had reiterated that its global smartphone sales are expected to take a massive hit due to the pandemic. Smartphone sales made up 47% of the company’s total revenue in 2019.

Samsung’s memory chips, on the other hand, had accounted for over 50% of the company’s operating profit last year. Samsung had foreseen a hit to its consumer electronics business this year but was optimistic about its memory chip sales to recover on greater demand from data centres.  

Samsung Moved Production Base To India & Vietnam

Foreseeing the broader impact of the outbreak on China, Samsung had moved its production base to other countries including India and Vietnam. The strategy worked well for the smartphone manufacturer as business for its U.S rival, Apple Inc., was broadly disrupted in the first three months of the new year.

As COVID-19 spread quickly across borders, however, Samsung had to later shut its factories in India, Europe, and the United States.

According to NH Investment & Securities, Samsung’s flagship smartphone, Galaxy S20, is likely to hit 20 million units in 2020 versus a much higher 32 million that it estimated earlier.

DRAMeXchange also highlighted a 3.5% increase in DRAM memory chips prices on Tuesday.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.