Samsung Electronics profits see 60% boost on Huawei orders

Samsung Electronics is seeing a two-year high in profits riding high on Huawei troubles and a rise in demand for its chips.



Samsung Electronics saw a jump of nearly 60 percent in its third-quarter operating profits Thursday, spurred by US sanctions against Chinese rival Huawei, which boosted its mobile and chip business.

The South Korean tech giant said in an earnings estimate that it expected operating profit to reach 12.3 trillion won ($10.6 billion) for July to September, up from 7.8 trillion won in the same period last year.

The prediction was the firm’s biggest operating profit of any quarter for two years and was also ahead of analyst forecasts.

This is well above a Refinitiv Smart estimate of 10.5 trillion won. It would be the strongest result since 17.57 trillion won in the third quarter of 2018.

“It seems Huawei’s impact on Samsung’s chip business was bigger than the market expected, and there was a big surprise in the smartphone and home appliance businesses,” said CW Chung, head of research at Nomura in Korea.

James Kang, senior analyst at Euromonitor International Korea, said Samsung’s rollout of its latest premium handset devices — the Galaxy Note 20 and the Galaxy Z Fold 2 — in August, coupled with strong sales of mid-range phones, led the firm’s third-quarter performance.

Washington has an ongoing trade and tariff war with China and has concerns that some tech companies are spying on the US through their subsidiaries. It also has issued licensing bans on use of US technologies for manufacturing chips and semiconductors in China. A ban on foreign companies providing Huawei with US-origin technology, came into effect on September 15 — cutting off essential supplies of semiconductors and software needed for making smartphones and 5G equipment. This worked in favour of Samsung.

“Many consumers were reluctant to buy Huawei phones because they thought that Huawei may discontinue phone sales and services because of U.S. restrictions,” Kang said.

Kang Min-soo, an analyst at Counterpoint Research, said US sanctions against Huawei were becoming “a big factor” affecting the global smartphone market.

“For Samsung, it will be a good opportunity to increase market share in Europe, where it has been competing with Huawei in various price bands,” he added.

It benefited also when Huawei stocked up on Samsung-made semiconductors before the US restrictions kicked in.

“Huawei has stocked about six months’ worth of extra inventory before the US ban took effect on September 15,” MS Hwang, an analyst at Samsung Securities, told Bloomberg News. “Huawei’s purchases are offsetting weakness in server-use demand and are devouring market inventory, which should affect prices down the road.”

Samsung is the world’s biggest manufacturer of memory chips and led the DRAM market with a 43.5-percent share in April-June, according to market researcher TrendForce.

Samsung Electronics shares closed down 0.3 percent on Thursday. Samsung has not revealed its net profit and other business performance data yet as its final earnings report is expected later this month.

There is also the scandal of its vice-chairman and de facto leader Lee Jae-yong being involved in a corruption scandal that could see him return to prison. The company might face some hiccups in decision making due to his retirement.

Samsung Electronics is an important subsidiary of the Samsung conglomerate. It is one of the largest family-controlled companies in South Korea, known as chaebols that dominate business in the world’s 12th-largest economy.

Its overall turnover is equivalent to a fifth of the country’s gross domestic product.

Avatar
Christy Gren
Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine she enjoys writing about Unicorns, Silicon Valley, Startups, Business Leaders and Innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B.

Recent Posts

Hyundai commits $7.4 billion in US investment by 2025

Hyundai commits $7.4 billion in US investment by 2025

South Korea’s Hyundai Motor Co., announced on Thursday it will soon start manufacturing electric vehicles in the United States. The automaker plans to produce EVs, upgrade produc
14 hours ago
US inflation report of 4.2 percent raises concerns

US inflation report of 4.2 percent raises concerns

The US reported the highest inflation recorded in the last dozen years at 4.2 percent in April, riding on government stimulus packages, improved energy prices, better spending and
17 hours ago
Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon – Willis asset disposal aims to ease approval of $30 billion merger

Aon Plc and Willis Towers Watson have agreed to sell $3.6 billion worth of assets to rival Arthur J. Gallagher & Co. in a bid to appease European competition regulators over th
2 days ago
Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox declares Q1, reports $387 million revenue as bookings increase

Roblox, the hugely popular online gaming platform, reported its first-quarter earnings after becoming a listed company. Its revenue more than doubled as the videogame company benef
3 days ago
Weak US job report results in volatile market

Weak US job report results in volatile market

A weak job report resulted in a record close on Friday for the US stocks. The US labor department’s monthly non-farm payrolls report revealed employers hired 266,000 new workers
4 days ago
Star and Blackstone launch bids to buyout Australia’s Crown Resorts

Star and Blackstone launch bids to buyout Australia’s Crown Resorts

A bidding war has broken out between Australian casino company Star Entertainment Group and US private equity investor Blackstone Group over Crown Resorts, Australia’s bigges
4 days ago