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Earnings

Samsung Elec posts record-high quarterly sales, warns of Q4 profit decline

By Oct 29, 2020 (Gmt+09:00)

Samsung Electronics Co.’s third-quarter operating profit rose to its highest level in two years on firm demand in smartphones and memory chips, which also helped the company post record-high quarterly sales.

But the South Korean tech giant warned that fourth-quarter profit will decline on weakening server chip demand and intensified smartphone competition. It expects to see a gradual recovery in 2021.

The company said it will aggressively expand capital spending for this year as it aims to strengthen its market leadership and widen the gap with its global rivals.

Operating profit in the July-September period reached 12.35 trillion won ($10.96 billion), up 59% from 7.78 trillion won a year earlier, the world’s top maker of memory chips and smartphones said in an Oct. 29 regulatory filing.

That marks Samsung’s best quarterly performance since the third quarter of 2018 and comes in line with its estimate of 12.3 trillion won announced earlier this month.

Samsung's third-quarter sales rise to record high, boosted by smartphones and memory chips
Samsung's third-quarter sales rise to record high, boosted by smartphones and memory chips

Net profit climbed 49% on-year to 9.36 trillion won. Revenue rose 8% to 66.96 trillion won over the cited period, marking its highest-ever quarterly sales.

“Even as the COVID-19 pandemic continues around the world, reopening of key economies led to the significant increase in consumer demand and stronger sales of memory chips,” Samsung said in a statement.

Revenue from its semiconductor division rose 6.9% to 18.8 trillion won as its chip business operating profit nearly doubled to 5.54 trillion won.

Samsung’s consumer electronics division chalked up sales of 14.1 trillion won, up 29% from a year earlier. The business unit’s operating profit nearly tripled to a record 1.56 trillion won.

Samsung Elec posts record-high quarterly sales, warns of Q4 profit decline

AIDED BY HUAWEI DEMAND, APPLE DELAY

Samsung’s IT & mobile communications division posted 30.49 trillion won in sales with its operating profit rising 52.4% to a six-year high of 4.45 trillion won. The company’s third-quarter handset sales topped 88 million units, of which 90% were smartphones.

The firm’s strong quarterly performance in its mobile business benefited from a US ban on Chinese tech company Huawei Technologies Co. that came into effect Sept. 15.

Analysts said Apple Inc.’s delayed launch of its 5G iPhones to October as well as Samsung’s reduced marketing costs in the pandemic era also contributed to its stellar performance.

Samsung’s semiconductor business also got a boost from increased orders form Huawei, which had been stockpiling ahead of the US restrictions on the Chinese firm.

INVENTORY ADJUSMENTS CLOUD OUTLOOK

Samsung expects its memory chip profitability to worsen in the fourth quarter on subdued demand for computer servers amid intensified global competition. It added that profits in its smartphone business would also be pressured on increased marketing costs.

“Soft prices in server memory caused by customers’ inventory adjustments will likely weigh on our memory business,” it said.

For 2021, Samsung expects a gradual recovery in overall global demand but emphasized that uncertainties remain over a potential resurgence of the pandemic.

The company said its capital expenditure in the third quarter stood at 8.4 trillion won, including 6.6 trillion won spent on chips and 1.5 trillion won on displays. Full-year capital spending is expected to reach 35.2 trillion won, up by 8 trillion won from 2019.

Shares of Samsung Electronics were down 1.7% at 58,000 won in late Thursday trade in Seoul, underperforming the broader Kospi market’s 0.9% fall.

Write to Jeong-Soo Hwang and Hyung-Suk Song at hjs@hankyung.com

In-Soo Nam edited this article.

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