Samsung Electronics forecasts 44.19% jump in Q1 operating profit

Samsung Electronics forecasts 44.19% jump in Q1 operating profit

FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul
The logo of Samsung Electronics is seen at its office building in Seoul, South Korea on Jan 7, 2019. (Photo: Reuters/Kim Hong-ji)

SEOUL: South Korean tech giant Samsung Electronics flagged a 44.19 per cent rise in first quarter operating profit on Wednesday (Apr 7), largely driven by robust sales of smartphones and the launch of its flagship Galaxy S21 series.

The company said in an earnings estimate that it expected operating profits of 9.3 trillion won (US$8.3 billion) for January to March, up from 6.45 trillion won a year earlier.

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.

It is crucial to the country's economic health - the conglomerate's overall turnover is equivalent to a fifth of the national gross domestic product.

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 2.8 million people worldwide - has also seen many tech companies boom.

Coronavirus-driven working from home has been boosting demand for devices powered by Samsung's chips, as well as home appliances such as TV and washing machines.

Analysts say the the company has had a particular boost from rolling out its Galaxy S21 series in January, more than a month ahead of the flagship product's usual annual launch schedule.

"Key to the success of this latest flagship has been its lower US$799 starting price," tracker Counterpoint Research said in a report.

"Lower cost coupled with trade-in offers that essentially make the S21 device free, is helping increase demand for these 'entry-level' flagships."

JAILED LEADER

The global chip-manufacturing industry had been expecting to see record revenue this year, with the stay-at-home economy persisting, according to Taipei-based market tracker TrendForce.

But power outages across Texas in the US - caused by a severe winter storm-- shut down semiconductor factories clustered around Austin in February, including Samsung's.

Samsung said operations at its factory returned to almost normal in late March, but South Korea's Yonhap news agency reported the company may suffer around 400 billion won (US$357 million) in losses due to the shutdown.

Still, Hi Investment and Securities in Seoul said Samsung's Q1 performance will greatly benefit from its mobile business, backed by solid shipments and cost control.

The tech giant is expected to have produced around 62 million smartphones in the first quarter, with a market share of 18.1 per cent, according to TrendForce.

With the estimates, Samsung is expected to reclaim its global smartphone market lead, the tracker said, after losing the spot to Apple during the last quarter of 2020.

"For the whole 2021, TrendForce expects Samsung to top the annual ranking" of smartphone brands by production, it added.

But Samsung's de facto leader Lee Jae-yong was jailed in January over a sprawling corruption scandal that brought down former president Park Geun-hye.

That ruling raised uncertainty over the succession at the giant company after the death in October of his father Lee Kun-hee, the chairman who turned Samsung Electronics into a global powerhouse.

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

Source: AFP/zl

Bookmark