Samsung reports record quarter, but predicts weak memory demand and “intensifying” smartphone competition

While better known for its smartphones and the recent launch of the Galaxy Z Fold2, Samsung also makes semiconductors, with a heavy focus on memory chips. While 3Q was a record quarter in revenues, the forecast is for weakening memory chip demand in 4Q. (Samsung)

 

Samsung Electronics of South Korea on Thursday reported its highest-ever quarterly revenue in the third quarter of more than $59 billion (67 trillion KRW), including $16.7 billion in semiconductor revenues.

Overall sales were up 8% year-over-year and up 26% compared to second quarter. Operating profit was far ahead of a year ago, up by 58%, and nearly reaching $11 billion (12.35 trillion KRW).

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Even so, the South Korean giant predicted a decline in profits in the current quarter that will end Dec. 31 with weak memory chip demand and strong competition in smartphones and consumer electronics.

Samsung’s semiconductor sales in 2019 made it the second largest company globally behind Intel, even though the company is better known for its smartphones, displays and appliances.

Recently, Samsung Chairman Lee Kun-hee died Oct. 25 at age 78 after six years of illness. The legendary titan had led the company since 1987, which he inherited from his father. He famously instituted sweeping management reforms in 1993 that were followed by mass burnings of Samsung products he considered defective.

“All of Samsung will cherish his memory and everlasting legacy,” said Ben Suh, executive vice president of investor relations, on the Thursday earnings call.

Samsung oversees a multinational conglomerate that counts semiconductors as its second-largest business behind mobile products.  It is also well known for display panels used in many consumer products, including televisions.

After the Thursday earnings call, shares of the company fell more than 1.5% primarily on Samsung’s downward forecast for the fourth quarter. In a statement, the company said profits will decline the fourth quarter with weakening memory chip demand from server customers and “intensifying competition in mobile phones and consumer electronics.”

Samsung said soft prices in server memory will likely weigh down the memory business. However, Samsung will begin supplying 5nm 5G wireless system-on-chips, while the company’s foundry business expects increased demand for high performance computing chips and mobile chips. Overall semiconductor sales were up in the third quarter by 7% year over year, while memory alone was up by 8%.

Mobile sales in the third quarter hit nearly 30 trillion KRW ($26.5 billion) an improvement of 6% over a year ago and up 51% over second quarter on the strength of flagship smartphone launches such as the Note20 and Z Fold2 and a recovery in demand for mass market models.

After a decline in mobile profits in the fourth quarter, going into 2021, Samsung said the smartphone market is expected “to recover gradually despite uncertainties such as COVID-19 and the US-China trade dispute.”

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