What just happened? The disruption caused by Covid-19 and the resulting lockdowns has been devastating for many businesses, but not Samsung. The Korean electronics giant predicts that its operating profit rose 23 percent for the three months ending in June, for which it can thank the demand for server chips and long-time rival Apple.
In its latest earnings guidance, Samsung writes that its profit is up to 8.1 trillion Korean won (about $6.8 billion) for the second quarter, beating analysts’ estimates. That’s despite a 7.4 percent year-on-year decline in sales, which was expected.
Samsung notes that its estimates include a one-off gain in its display business. According to Mark Newman, managing director and senior analyst at Bernstein, this is a payment from Apple, which is “making up for them not buying enough displays last year.”
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While demand for many of Samsung's consumer products dropped during the lockdowns, an increase in remote working and studying boosted demand for its server chips from data centers, helping soften the blow of falling retail sales.
The situation saw the price of the chips increase as companies scrambled to buy extra stock, thereby further improving Samsung’s bottom line.
Memory chip prices have started dropping recently, and they’re expected to return to normal as demand falls, but Samsung’s profits will be boosted by an increase in smartphone sales following the launch of the Note 20 series and its other handsets. The upcoming iPhone 12 line means more work for its display business, while the US government’s push to remove Huawei from TSMC’s customer list will likely benefit Samsung.