Samsung’s Q1 earnings beat market estimates

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Samsung’s Q1 earnings beat market estimates

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Samsung Electronics announced better-than-expected profits for the first quarter in its preliminary earnings forecast released on Tuesday as robust chip sales offset the losses incurred from declining sales of smartphones and consumer electronics in the wake of the coronavirus pandemic.

The Korean tech giant said that its operating profit will likely rise 2.73 percent to 6.4 trillion won ($5.2 billion) during the January-March period compared to the same period last year.

The estimate is higher than the average market consensus at 6.09 trillion won compiled by financial information services provider FnGuide as of April 6.

Revenue is expected to increase 4.98 percent on year to register 55 trillion won, which was in line with market expectations, Samsung said.

Analysts and market trackers see that the world’s largest smartphone manufacturer could fare relatively better in the first quarter thanks to the performances of chip businesses.

Chipmakers including Samsung enjoyed a surge in demand in the first three months of the year since clients started stacking up inventory, along with a surge in demand for server dynamic random access memory (DRAM).

The rising demand from server DRAM is attributed to the worldwide spread of remote working and increased online content consumption as people are told to stay home to limit the spread of the coronavirus.

But the true challenge will come later down the road, according to analysts, since the damaged consumer sentiment will eat away sales of smartphones and computers.

The decline in sales could not only prompt electronics makers to cut back on their orders of chips but erode revenue for Samsung.

Samsung pinned hopes on its latest flagship smartphone Galaxy S20 to drive sales, but sales so far are falling short of expectations.

“The shipment of Galaxy 20 models could dip below 60 million, lower than previously expected since the model failed to distinguish itself and suffered a slowdown in demand due to the outbreak,” said Kim Sun-woo, an analyst at Meritz Securities.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

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