OP Surges by More Than 50%
Samsung Electronics has delivered an earnings surprise for the third quarter. The company announced on Oct. 29 that it posted the highest-ever quarterly revenue of 66.96 trillion won and a 52 percent jump in operating profit at 12.35 trillion won.
The company said it could attain the record high revenue by responding aggressively to the COVID-19 pandemic through flexible global supply chain management (SCM).
It said its quarterly operating profit rose thanks to a boost in demand for smartphones and consumer electronics as well as efficient cost management. Third-quarter operating profit was also 59 percent higher year-on-year on stronger sales of memory chips and consumer products.
The Semiconductor businesses posted 18.8 trillion won in consolidated revenue and 5.54 trillion won in operating profit in the third quarter.
The Memory Business 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 System LSI Business also saw profit rising over demand for mobile phone components, while the Foundry Business benefitted from increased orders for high-performance computing (HPC) chips and other applications.
The Display Panel Business posted 7.32 trillion won in consolidated revenue and 0.47 trillion won in operating profit for the third quarter. Its earnings improved driven by increasing sales of smartphone, TV and monitor panels, despite the impact of COVID-19.
The Display Panel Business reported higher profit quarter-on-quarter led by growing mobile display sales on customers’ new product launches and improved supply-demand environment for large panels.
The IT & Mobile Communications Division posted 30.49 trillion won in consolidated revenue and 4.45 trillion won in operating profit for the third quarter.
A near 50 percent jump in sales of smartphones including new flagship products, coupled with improved cost management, lifted earnings at the Mobile Communications Business from the previous quarter.
The Consumer Electronics Division also witnessed a sharp growth in sales of premium TVs and appliances, supported by flexible management of supply chain and sales channels.
Comprised of the Visual Display and Digital Appliances businesses, the division recorded 14.09 trillion won in consolidated quarterly revenue and 1.56 trillion won in operating profit.
Looking ahead, Samsung Electronics expects profit to decline in the fourth quarter amid weakening memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics.
Soft prices in server memory due to customers’ inventory adjustments will likely weigh down the Memory Business despite stable demand for mobile and laptop memory. The System LSI Business will begin supplying 5-nm 5G system-on-chips (SoCs) in earnest and the Foundry Business expects increased demand for HPC chips and mobile SoCs. In displays, mobile panel sales are set to rise significantly from the third quarter.
The Mobile Communications Business is likely to see smartphone sales decline and marketing costs increase due to competitive market environment. In Consumer Electronics, profitability is expected to weaken on growing competition and rising costs, despite solid demand.
For 2021, the Company expects a recovery in overall global demand but uncertainties will remain over the possibility of recurring epidemic waves of COVID-19.
Samsung aims to enhance its leadership in memory chips through expansion of next-generation process node, flexible production management to meet immediate demand and timely investment to address demand over the mid- to long-term.
The System LSI Business will focus on differentiated 5G SoCs and high-resolution sensors, while the Foundry Business seeks to accelerate growth by diversifying applications to HPC and securing new major customers.
As the Display Panel Business plans to launch new Quantum-Dot (QD) Displays in 2021, it will also focus on improving earnings by enhancing leadership in mobile displays.
The Mobile Communications Business plans to expand foldable and 5G model offerings globally, while the Networks Business will strengthen its global positioning on the back of growing commercial 5G services. The Consumer Electronics Division will strengthen its online and B2B presence and expand its premium product lineup.