Samsung Electronics Co yesterday reported that its net profit jumped by almost half in the third quarter as the South Korean giant’s mobile and chip businesses were boosted by US sanctions against Chinese rival Huawei Technologies Co (華為).
The world’s biggest memorychip maker said that profits in the July-to-September period climbed 48.8 percent year-on-year to 9.36 trillion won (US$8.25 billion), beating expectations, Bloomberg News reported.
However, the company said that profits in the current quarter are projected to decline, with chip demand weakening, and competition intensifying in the smartphone and consumer electronics market.
Analysts have said that the firm’s introduction in August of its latest premium smartphones — the Galaxy Note 20 and the Galaxy Z Fold 2 — coupled with strong sales of mid-range phones led the firm’s third-quarter performance.
A US ban on foreign companies providing Huawei with US-origin technology — which took effect on Sept. 15, cutting off essential supplies of semiconductors and software needed for making smartphones and 5G equipment — also provided a boost.
“Samsung has been quite aggressive in new launches, as well as channel strategies, riding on the ongoing anti-China sentiment,” Counterpoint senior analyst Prachir Singh said.
A reduction in marketing costs due to the pandemic was “also helpful in terms of operating profit” for Samsung, Counterpoint analyst Lim Sujeong said.
The firm’s memory business also benefited from the feud after Huawei rushed to stock up on Samsung-made semiconductors before the US restrictions began.
That segment “posted solid earnings as healthy demand for mobile and PC products led to higher-than-expected shipments, outweighing the impact of lower memory chip prices,” the firm said in a statement.
Operating profit rose 58.7 percent to 12.35 trillion won, while sales rose 8 percent to 66.96 trillion won — a record for any quarter.
However, the firm’s immediate prospects might not be so rosy.
Samsung said that its smartphone sales for the fourth quarter are expected to decline because of “subsiding effects from new flagship model launches,” while higher marketing spending in the face of intensifying competition “is also likely to weigh down profit.”
Earlier this year, the firm was dethroned by Huawei from its long-held position as the world’s biggest smartphone maker, as the Chinese economy recovered from the COVID-19 pandemic.
Samsung still leads the global DRAM chip market, with a 43.5 percent share in the second quarter, market researcher TrendForce Corp (集邦科技) said.
Server DRAM chips enjoyed a boost as the pandemic prompted remote working and distance learning, but are now experiencing “significant oversupply,” it said.
“Therefore, contract prices of server DRAM products continue to descend to new lows,” Samsung said, forecasting a 13 to 18 percent drop in the fourth quarter.
“The situation in the semiconductor market including servers market is likely not so good, thus there is a lot of uncertainty. Server demand is also decreasing,” Lim said. “Also, as the supply for Huawei has been suspended, it may take some time for Samsung to find another client to make up for the lost business.”
Samsung shares yesterday closed down 1.53 percent in Seoul trading.
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