Samsung Electronics’ net profit rose more than 70 percent in the second quarter thanks to higher prices for memory chips fueled by demand sparked by the pandemic, the South Korean tech giant said on Wednesday.
Work from home due to coronavirus has increased the demand for devices and devices powered by Samsung memory chips.
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The company said that “memory shipments exceeded previous instructions and price increases were higher than expected.” The world’s largest smartphone maker saw net profit rise 73.4% year-on-year to 9.6 trillion won ($ 8.4 billion) in April-June, the company said in a regulatory filing.
Operating profit rose 54.3% to 12.6 trillion won from 8.1 trillion won a year earlier, more than half of which came from the company’s semiconductor business.
The strong results come despite Samsung’s quarterly earnings drop from its smartphone business due to supply chain problems that have cut global production. Samsung Electronics is the flagship subsidiary of the giant Samsung Group, by far the largest of the family-controlled empires that dominate business in South Korea, the 12th largest economy in the world.
The total turnover of the group is equivalent to one fifth of the gross domestic product. Analysts say the chip share in the company’s profits is likely to increase in the coming months.
“Samsung will benefit from memory chip prices that are likely to rise in the third and fourth quarters,” Cape Investment & Securities analyst Park Sung-soon told AFP. The company expects favorable market conditions for the rest of the year, with continued demand for memory chips in the server and mobile markets.
However, he warned that the uncertainty fueled by the pandemic would continue in the second half, noting “continuing disruptions in the supply of components”. Shares of Samsung Electronics closed 0.25% on Thursday.
Samsung is expected to unveil the latest foldable Galaxy Z and clamshell Galaxy Z Flip smartphone models next month. Manufacturers of folding systems are becoming increasingly competitive and include competitors such as Chinese Huawei and Xiaomi.
The upcoming gadgets will be equipped with “new multitasking capabilities and increased durability,” said TM Roh, head of Samsung Electronics’ mobile communications business.
Samsung aims to consolidate its position in the smartphone market “with the launch of its premium range of phones as well as cheaper models in the third quarter,” said James Kang, senior analyst at Euromonitor International.
But Kang said the company could face headwinds next year, as consumer demand is likely to be weaker than in 2021. Samsung is also facing legal challenges.
Lee Jae-yong’s leader is currently on trial, accused of manipulating a takeover to smooth over his succession at the top of the Samsung group.
Lee was jailed separately in January for a corruption scandal that toppled former President Park Geun-hye.
South Korean corporate leaders and scholars say a leadership vacuum could prevent the company from making large-scale investment decisions that were previously crucial to its global rise.
But Lee’s absence would not have had a big impact on Samsung’s second-half earnings, the Park of Cape Investment said.
However, his return to management “could speed up the decision-making process for long-term investments,” he added. Lee is eligible for suspension next month after completing more than half of his two-and-a-half years in prison.
Meanwhile, LG Electronics, the second largest appliance company in South Korea after Samsung, jumped 65.5% in operating profit for the second quarter to 1.1 trillion won. Its shares rose 1.5%.