Samsung earnings soar as smartphone sales rebound and rival Huawei struggles
The South Korean conglomerate said on Thursday that it expects to make an operating profit of roughly 12.3 trillion won ($10.6 billion) for the July-September quarter. That’s up 58% from the same period a year ago. The estimates also beat the 26% profit bump analysts polled by data provider Refinitiv had predicted.
Samsung said it expects sales for the third quarter will rise about 6% to 66 trillion won ($57 billion). Analysts polled by Refinitiv had predicted 63 trillion won in sales ($54.5 billion).
Shares in Samsung were last trading down 0.2% in Seoul.
Samsung, which did not elaborate on earnings, will report full results for the third quarter at the end of this month.
Earlier this year, the company was displaced by Huawei as the world’s top smartphone seller as the coronavirus pandemic weighed on the global economy. Most of Huawei’s sales are in China, which has recovered faster than other countries.
But the slump may now be easing for Samsung, just as fresh sanctions on Huawei leave the Chinese company struggling to survive. Washington says Huawei poses a national security risk and has cut the Chinese company off from key suppliers that use US technology and software. Huawei has repeatedly denied that its products pose national security risks.
For Samsung, a sharp rise in smartphone sales will drive a rebound in earnings for the third quarter and the boost will likely carry over to next year, SK Kim, an analyst at brokerage firm Daiwa, said in a research note last week.
The sales bump is driven by US restrictions on Huawei, a rise in demand for 5G phones and “improved cost structure with a rapid shift to online marketing,” said Kim. The pandemic has led to the shutdown of retail stores around the world and lower marketing costs.
As millions of people around the world continue to work, play games and watch movies from home, Samsung had been enjoying a boost to its memory chip business thanks to demand from data centers. But Kim said he expects Samsung will see weaker earnings from the unit going forward, “due to memory price drop from inventory adjustment.”
The company also supplies key parts like display panels and memory chips for other smartphone makers such as Apple, as well as Huawei rivals Xiaomi and Oppo, according to local reports.
“Samsung is poised to see shipments of semiconductors and display panels to captive customers grow, fueled by increased sales,” Lee Su-bin, an analyst with Daishin Securities, wrote in a note last month.
“It stands to benefit more significantly than any of its peers from the ongoing ban on Huawei,” he added.