Samsung Electronics flags 26per cent rise in fourth-quarter profit on chip, display sales

SEOUL: Samsung Electronics Co Ltd said on Friday its fourth quarter operating profit likely rose 26per cent as coronavirus pandemic driven remote working and TV-watching fuelled sales of chips and display panels.

However, profit likely fell about 27per cent when compared with the previous quarter, analysts said, due to weaker smartphone sales, marketing costs and a strong won versus U.S. the dollar.

The 9 trillion won (US$8.24 billion) estimate provided by the South Korean tech giant for profit in the December quarter was in line with a 9.1 trillion won analyst forecast by Refinitiv SmartEstimate. That analyst forecast was trimmed back from 9.5 trillion earlier in the week.

Samsung, the world's biggest memory chip supplier and maker of smartphones, also said revenue likely rose 1.9per cent to 61 trillion won.

The company provides only estimates of quarterly revenue and operating profit in its preliminary earnings release. Full earnings are due later this month.

"Work from home will become entrenched," said Park Sung-soon, analyst at Cape Investment & Securities. "Samsung's supply comments, and investments in non-memory chips, will be issues to watch out for when full results are announced."

Analysts expect Samsung to report a jump in memory chip shipments in the December quarter, compared with the prior quarter, offsetting lower prices.

Those prices will likely rebound in the first half of this year, analysts said, as data centre customers return to buying chips, as well as demand from 5G smartphones, notebooks, graphics and automotive.

Samsung's share price has been boosted by a global shortage of chips that has forced firms to scramble to secure production capacity from contract chip manufacturers, or foundries.

Samsung Electronics shares rose 2.2per cent in early trade, compared to a 1.8per cent rise in the wider market, having risen about 56per cent since September.

South Korea expects semiconductor exports to rise more than 10per cent in 2021, as the pandemic encourages companies to add bandwidth for remote work and consumers to buy devices.

U.S. memory chip peer Micron Technology Inc on Thursday forecast second-quarter revenue above Wall Street estimates.

SMARTPHONE SLUMP

On the flip side, Samsung likely recorded an estimated 17.5per cent drop in smartphone shipments in the December quarter compared to the previous quarter, Counterpoint Research said, due to a high base from brisk sales in the September quarter and competition from Apple's new iPhone 12.

Samsung is expected to unveil its latest flagship smartphone next week. That would be earlier than in past years, a strategy Counterpoint said was likely aimed at filling the vacuum left by Huawei Technologies losing market share after U.S. government regulations restricted supplies.

A strong won against the U.S. dollar also dented profits. Samsung makes the bulk of its profits in dollars but reports in won.

(US$1 = 1,093.0600 won)

(Reporting by Joyce Lee and Heekyong Yang; Editing by Jane Wardell)