Samsung Electronics Co. Ltd, the company that owns all Samsung products including the mobile business and its home electronics on Wednesday said it’s expecting even more profit decline in the current quarter due to the Coronavirus pandemic because of the big slump in sales of smartphones and TVs even though the company is still making its profit elsewhere, from its Chipsets.
Samsung isn’t the only company with declining profit this period as other tech giants such as SK Hynix and Intel are also seeing declines in business growth this year due to the negative effect of the pandemic worldwide.
It said that while work-from-home orders and the related growth in online learning would underpin demand for memory chips, the outlook for smartphones and TVs was bleak as consumers put off discretionary spending.
“Even as such uncertainties persist, overall conditions in the memory industry are likely to be favorable due to server and PC demand,” Han Jin-man, senior vice president at Samsung’s chip business, said during a conference call.
Samsung expects both its Smartphone and TV businesses profits to “decline significantly” this second quarter of the year (2020) because consumers aren’t spending on those products while many businesses deemed “non-essential” as well as factories have all been closed down.
Samsung is among the top makers of Memory Chips and smartphones (at Number one right above Apple and Huawei in 2019) reported an operating profit rise of about 3% to SK₩ 6.4 trillion (about US$5.2 Billion) in the first quarter all due to the increase in chip demands and reduced marketing spending on phones. The company’s shares fell 0.3% after the results on Wednesday, while the wider market was up 0.6%.
“Earnings will deteriorate in earnest for mobile phones, home appliances and TVs, which are weighing on stocks,” said Park Sung-soon, an analyst at Cape Investment and Securities.
SK Hynix and Intel posted their forecast last week which showed that the Q2 earnings beat that of the Q1 but didn’t provide full-year on forecasts.
Samsung’s chip business posted first-quarter operating profit of 3.99 trillion won, down 3% from a year earlier.
Another reason for the rise would be the fact that some of it’s customers were restocking chips because of concerns about supply disruption due to the pandemic which further boost earnings for the chip business of Samsung.
The mobile division posted operating profit 2.65 trillion won, up 17% from a year earlier. The company made it known that despite the drop in the numbers of shipment compared to the previous quarter, profitability improved with 5G and other premium models making up a greater portion of sales for the company.
As for the TV business, it’s loss wasn’t as intense unlike the previous year of about SK₩ 290 Billion despite the declining sales in China because of a rebound in TV panel prices due to supply disruptions.
In March Samsung said it would end production of mainstay LCD panels in China and Korea by the end of 2020, due to oversupply stemming from expansion by Chinese companies.
With Samsung’s diversified business, it was easy for the company to make profit from one area even if the other is lagging behind due to economy situations like the current one we’re experiencing (The Coronavirus pandemic). Samsung counts Apple Inc and Huawei as both competitors and customers.