Samsung Electronics Co Ltd. (Samsung Electronics), owned by a leading South Korean conglomerate group, Samsung Group (Samsung), projects that the profit of the company is likely to decline in the second quarter (Q2) due to coronavirus-related effects. The group has earlier reported that the virus outbreak caused a sales decline of its major products such as smartphones and TVs, although the chip business would remain intact.
Sales Intact in Chip Business
Samsung Electronics reported that an overall operating profit of the company reached 6.4 trillion won ($5.2 billion), compared with 6.2 trillion won a year ago because of the rise of the sales revenues of its chip business. The company disclosed that its operating profit rose 3% in the January-March period as per analysts’ estimation since work-from-home increased demand for server and computer chips.
Last week, other chipmakers including SK Hynix and Intel had posted to see forecast-beating for Q1 earnings but did not provide full-year forecasts. Samsung said that the net profit of the company fell 3% to 4.9 trillion won, while revenue climbed 5.6% to 55.3 trillion won. The main reason was Samsung’s chip business benefited from the growing demand for servers and computers as millions of people had to convert their homes into offices.
However, the South Korean conglomerate reveals that it cannot foresee much on market behavior as there is uncertainty over how long the coronavirus will continue to hurt the industry. On Wednesday, April 29, 2020, Samsung said in a statement, “In the second half, uncertainties driven by COVID-19 will persist as the duration and impact of the pandemic remain unknown.”
Sales Decline in TVs and Smartphones
Considering the present trend of the global tech industry due to the virus impact, the South Korean company warned that sales of its key products mostly, TVs and smartphones would be slowed down as customers have less focus on buying non-essential electronic products.
Samsung said in the statement, “Sales and profits of set products business, including smartphones and TVs, are expected to decline significantly as COVID-19 affects demand and leads to store and plant closures globally.” Similarly, Park Kang-ho, an analyst at Daishin Securities, estimated, “Samsung will have a greater impact from the virus in the second quarter as it has spread to Europe and the United States starting March.”
Samsung reported that the company’s mobile shipments fell from the previous quarter due to the virus impact, but it improved profitability because of the sales-boosting of 5G models and using marketing expenses more efficiently.
The group posted that its TV business had a loss of 290 billion won, nearly halving its losses from a year earlier while its mobile displays posted a decline in earnings amid lower sales in China due to COVID-19 related shutdowns, but lost narrowed in the large panel business.
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