Samsung Electronics’ earnings likely to hit a two-year high after Huawei’s orders and phone recall

Seoul: Samsung Electronics Co Ltd said its third-quarter profit likely rose 58 percent to the highest in two years, beating analysts’ estimates, as US restrictions on China’s Huawei boosted sales of the company’s phones and chips. South Korean tech giant.

The U.S. action against Huawei Technologies Co Ltd has slowed demand for its phones outside of China, giving Samsung an advantage, analysts said.

The Chinese firm was also quick to order more chips from Samsung after Washington moved to block its access to commercially available chips starting in mid-September.

Samsung said Thursday that operating profit was likely 12.3 trillion won ($ 10.6 billion) for the three months ending in September, well above a Refinitiv SmartEstimate of 10.5 trillion won. It would be the strongest result since 17.57 trillion won in the third quarter of 2018.

Revenue was likely up 6 percent from the same period last year to 66 trillion won, the company said.

Samsung released only limited data in Thursday’s regulatory filing ahead of the release of detailed earnings figures later this month.

“It appears that Huawei’s impact on Samsung’s chip business was greater than the market expected, and there was a big surprise in the smart phone and home appliance business,” said CW Chung, Nomura’s head of research in Korea.

INCREASE OF MOBILE BENEFITS

Samsung was expected to post its biggest smartphone profit in at least four years, analysts said, as it gained market share from its Chinese rivals and the coronavirus pandemic helped drive down marketing costs.

Washington says Huawei is a vehicle for Chinese state espionage and has tightened restrictions on the company, hurting demand for Huawei phones in Europe and other countries and boosting Samsung sales at a time when markets were out of reach. China is recovering from the COVID-19 lockdowns, analysts said.

“Many consumers were reluctant to buy Huawei phones because they thought that Huawei might discontinue phone sales and services due to US restrictions,” said Tom Kang, an analyst at Counterpoint, adding that Samsung has boosted phone sales. mid and low range.

A surge in anti-China sentiment in India following a border crash in June is also seen as a boost for Samsung, which is competing with Xiaomi and other Chinese rivals there.

Samsung’s home appliance business also benefited from pandemic lockdowns, prompting consumers to spend more on home appliances like air purifiers.

Consumer electronics rival LG Electronics also said Thursday that it likely made its biggest third-quarter operating profit of 959 billion won, which analysts attributed to strong sales of appliances and televisions.

CHIP PRICES LOWERING

Shares in Samsung have gained about 7 percent so far this year.

They closed down 0.3% on Thursday in a slightly firmer overall market, with analysts pointing to memory chip prices and the uncertain fourth-quarter outlook for the muted response.

Analysts doubted that Samsung’s fourth-quarter earnings could beat the third, as memory chip prices are bottoming out and a new Apple iPhone model is expected on the market.

US rival Micron Technology Inc, which posted quarterly earnings that beat the market last month, forecast lower-than-expected sales in the following quarter as it had not yet obtained the new licenses needed to sell its memory chips to Huawei.

Market researcher Trendforce expected prices for DRAM chips to drop roughly 10 percent in the year-end quarter, as demand from the server industry has yet to noticeably rebound.

This occurs even as Huawei’s rivals Xiaomi, OPPO and Vivo are urgently sourcing key components, which in turn provides some support for the mobile DRAM chip market, Trendforce said.

(US $ 1 = 1,157.3700 won)

(Reporting by Joyce Lee; Editing by Christopher Cushing, Richard Pullin and Kim Coghill)