Saturday, 18th May, 2024
Saturday, 18th May, 2024

Samsung Electronics profit spikes on pandemic-driven demand

– Samsung Electronics, the world’s biggest
smartphone and memory chip maker reported fourth-quarter net profits up by
more than a quarter year-on-year Thursday, with coronavirus-driven working
from home boosting demand for devices powered by its chips.

But the figures were below market expectations according to Bloomberg
News, and the company warned of persisting uncertainties over the pandemic,
and lower profits in Q1 2021 due to falling prices.

Samsung Electronics is the flagship subsidiary of the giant Samsung group,
by far the largest of the family-controlled empires known as chaebols that
dominate business in South Korea, the world’s 12th-largest economy.

The conglomerate is crucial to the South’s economic health — its overall
turnover is equivalent to a fifth of the national gross domestic product.

Samsung Electronics said profits rose 26.4 percent in October to December
on a year earlier to 6.61 trillion won ($5.97 billion), led by display and
memory chip businesses.

“Although challenges from the COVID-19 pandemic continue, company-wide
efforts to ensure a stable supply of products and services globally helped
Samsung’s fourth-quarter results,” the firm said in an earnings report.

The coronavirus has wreaked havoc with the world economy, with lockdowns
and travel bans imposed around the globe for many months.

But the pandemic — which has killed more than two million people
worldwide — has also seen many tech companies boom, including Samsung.

“It’s true that Samsung’s sales increased year-on-year due to the spread
of the so-called ‘new normal’, which led to a surge in demand for
electronics,” said Jene Park, an analyst at market observer Counterpoint
Research.

Operating profit rose 26.4 percent to 9.05 trillion won, while sales were
also up 2.8 percent at 61.55 trillion won.

Even so, Samsung noted that profits fell from the previous quarter due to
weaker memory prices and sluggish consumer product sales, as well as higher
marketing costs and appreciation by the Korean won.

The trend was likely to continue, it said, with profitability in the
memory business affected by won strength “and costs associated with new
production lines, despite solid demand from mobile products and data
centres”.

It expected a recovery in overall global demand in 2021, but warned that
“uncertainties persist over the possibility of recurring COVID-19 waves”.

For the full year, net profit jumped 21.5 percent to 26.41 trillion won,
on sales of 236.81 trillion won, up 2.8 percent.

Samsung Electronics shares were down 1.64 percent in early trade Thursday.

– Jailed boss –

The global chip-manufacturing industry is expected to see record revenue
this year, with the stay-at-home economy persisting because of the pandemic,
according to Taipei-based market tracker TrendForce.

Samsung has aggressively stepped up its investments in semiconductors in
recent years.

As its latest investment, the tech giant is considering spending as much
as $17 billion to build a chip plant in Arizona, Texas or New York, the Wall
Street Journal reported last week.

If confirmed, it would be the biggest investment by Samsung in the absence
of its de facto leader Lee Jae-yong.

Lee was sentenced last week to two and a half years in jail in a retrial
over a sprawling corruption scandal that brought down former president Park
Geun-hye.

That ruling cast further uncertainty over Samsung after the burial of late
chairman Lee Kun-hee, who turned Samsung Electronics into a global
powerhouse, in October.

Experts say a leadership vacuum could hamper the firm’s decision-making on
future large-scale investments, which have been key to its rise.

Kim Dae-jong, a business professor at Sejong University, said: “Samsung is
a very important company for South Korea and the imprisonment of its leader
is disadvantageous.”

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