Samsung reports solid earnings in Q2 on strong chip business

Yolanda Curtis
August 1, 2020

Samsung said that it expects to see a continuation in the gradual recovery in demand for mobile and consumer electronics during the second half of 2020. The revenue figured constituted a decline on Q2 2019's KRW56.13 trillion (£36.0 billion), while operating profit was an annual increase from KRW6.60 trillion (£4.23 billion).

The total capital expenditure in the first half amounted to 17.1 trillion won (14.3 billion US dollars), including 14.7 trillion won (12.3 billion USA dollars) for semiconductors and 1.6 trillion won (1.3 billion US dollars) for displays.

"The memory business saw robust demand for cloud applications related to remote working and online education as the impact from COVID-19 continued, while demand for mobile was relatively weak", Samsung said.

Consolidated operating profit amounted to 8.15 trillion won (6.8 billion US dollars) in the April-June quarter, up 23.5 percent from a year earlier. That was in line with its preliminary earnings forecast earlier this month. Revenue totaled 52.9 trillion won, revised up from the preliminary figure of 52 trillion won.

Samsung shares closed unchanged in Seoul on Thursday at 59,000 won.

Samsung, the world's top maker of memory chips and smartphones, posted a 23% jump in operating profit in the April-June quarter on the back of strong DRAM chip sales.

LG Electronics, South Korea's second-largest appliance firm after Samsung, posted a second-quarter net profit slump of 38.1 per cent to 65.6 billion won Thursday, saying it had been "affected significantly" by the pandemic. Samsung says this was largely driven by the increased profitability of memory chips and displays, along with high demand for the IT products people have been using during lockdowns. Demand for monitors rose, but TVs sold worse due to the postponement or cancellation of major sporting events. However, the company also acknowledges that "risks remain due to persisting uncertainties from COVID-19 and growing competitions".

Samsung's operating profit grew most actively in the segment of memory chips, but mobile solutions were not responsible for the growth in sales volumes in this situation. The IT & mobile communications unit's operating profit was 1.95 trillion won, down from 2.65 trillion won in the first quarter when it released its first foldable smartphones but up from 1.56 trillion won a year ago.

The manufacturer put the results down to successful cost-optimisation efforts including the reduction of marketing expenses and offline promotions. The consumer electronics division generated 730 billion won in operating profit, gaining 50 billion won on year and 28 billion won on quarter, on solid sales of air conditioners and dryers as well as premium QLED TVs amid the stay-at-home environment.

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