Samsung Q2 operating profit up 23% on strong chip sales

Samsung's operating profit rose to 8.1 trillion won for the April June quarter from 6.6 trillion won a year earlier

Samsung Q2 operating profit up 23% on strong chip sales

Electronics giant Samsung blew past earnings predictions in the second quarter - and on Thursday (July 30) the company was cautiously optimistic it will finish the year strong.

However, it warned that its business still faces risks from the coronavirus pandemic and increased competition. That was in line with its preliminary earnings forecast earlier this month. Revenue fell 4% from the previous quarter, and 6% year-over-year, to 53 trillion won, while net profit rose 7% to 5.6 trillion won.

According to Samsung, the operating profits from semiconductors made up around 67% of the total profits.

Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that Samsung's results demonstrate the resilience of the memory chip market.

Demand slowed for mobile memory chips, while system LSI reported lower earnings amid weakness in the mobile market. "Samsung did a great job selling additional electronics to work from home workforces around the globe, most notably in its monitor business".

Revenue from the semiconductor unit stood at 18.23 trillion won in the second quarter of the year, a 13.3 per cent increase from a year earlier.

"Profit for the visual display business rose despite softness in sales as the company sought new sales opportunities online to overcome difficulties sparked by global lockdowns", the company said. Samsung did not disclose the exact amount of one-off profit, but industry insiders speculate it received more than $900 million from Apple Inc., which apparently failed to buy contracted volumes of Samsung Display Co.'s mobile display panels.

Samsung said it expected server demand for chips to remain solid for the remainder of the year and a boost in smartphone demand, given planned product launches and anticipated demand for 5G-capable phones.

The total capital expenditure in the first half amounted to 17.1 trillion won (14.3 billion US dollars), including 14.7 trillion won (12.3 billion USA dollars) for semiconductors and 1.6 trillion won (1.3 billion US dollars) for displays.

In the April-June quarter, Samsung's capital expenditure reached 9.8 trillion won (8.2 billion USA dollars), including 8.6 trillion won (7.2 billion US dollars) spent on semiconductors and 800 billion won (669.8 million US dollars) on displays. Revenue totaled 52.9 trillion won, revised up from the preliminary figure of 52 trillion won. "Given the multiple uncertainties, including the COVID-19 situation, rising trade tensions and a potential change in the inventory levels of suppliers and customers, it's hard to tell when the price inflection point will be", Han Jin-man, senior vice president of Samsung's memory business unit, said in the call. The IT & mobile communications unit's operating profit was 1.95 trillion won, down from 2.65 trillion won in the first quarter when it released its first foldable smartphones but up from 1.56 trillion won a year ago.

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