UPDATED 22:57 EST / APRIL 06 2020

APPS

Samsung beats preliminary earnings estimates on strong demand for memory chips

Samsung Electronics Co. Ltd. said Tuesday that it expects to report a first-quarter operating profit of 6.4 trillion won ($5.23 billion) on operating revenue of 6.3 trillion won ($45 billion) despite the COVID-19 pandemic.

The profit is up 2.7% over the first quarter of 2019 and ahead of analysts’ predictions of 6.2 trillion won ($5.05 billion), according to CNBC.

The better-than -expected profit resulted from higher demand for memory chips from laptop makers and data centers amid the coronavirus-driven shift to working from home.

Although the news for the first quarter was good, Samsung warned that smartphone sales along with TV and home appliances are expected to be sluggish in the second quarter. The company added, however, that these would be offset by a recovery in its semiconductor business thanks to rising demand for server memory.

“Increased non-face-to-face activities prompted by the COVID-19 outbreak has led to a surge in data traffic and server expansion,” Kim Dong-won, an analyst at KB Securities told the Yonhap News Agency. “It pushed up the average selling prices of memory chips.”

How far Samsung’s smartphone business will fall in the second quarter as the coronavirus pandemic has spread globally is open to speculation, but general consensus is that the entire smartphone market will be hit hard.

“Even though Samsung’s mobile business was hit by the coronavirus outbreak this quarter, it will likely face bigger challenges in the second quarter — now that the United States and Europe have become the hardest-hit countries,” Kim Sun-woo, an analyst at Meritz Securities, told Reuters.

Hana Financial Investment Co. Ltd. recently cut its forecast for Samsung’s smartphone shipments to 260 million in the second quarter, down from an initial forecast of 300 million. The figure could end up even lower. In February overall smartphone shipments plunged 38% year-over-year, according to Strategy Analytics, and that was before COVID-19 had seriously hit Western markets, including the U.S.

Foxconn, the Taiwanese company that produces smartphones for Apple Inc., reported today that sales had dropped 7.7% in March. With Apple reported to be delaying the launch of the iPhone 12 amid the coronavirus pandemic, those figures are likely to drop further in the months ahead as consumer demand dries up thanks to massive job losses.

Photo: DennisM2/Flickr

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