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Samsung Beats Estimates For Its First Quarter Forecast Despite Virus Pandemic

Samsung Beats Estimates For Its First Quarter Forecast Despite Virus Pandemic
Strong demand and sale for its chips helped South Korea’s Samsung Electronics Co Ltd to make a slight operating profit for the first-quarter compared to a contraction the in the same period a year ago. The growth in the chip segment also helped the company to offset the hit from the coronavirus pandemic during the quarter which hit demand and sale of smartphones and TVs.
The coronavirus pandemic has forced millions of workers to work from home and use laptops or desktops for work which has helped the global leader in semiconductors to benefit from that trend with higher demand for chips from laptop makers and data centres. This helped the company to cushion the hit of the coronavirus pandemic on its mobile and consumer electronics businesses globally.
The company now expects its first quarter operating profit to be 6.4 trillion won or $5.2 billion compared to 6.2 trillion won in the same quarter a year ago. According to Refinitiv SmartEstimate, the market is expecting the number to be at 6.2 trillion.
The company said that its revenues is likely to rise by 5 per cent year on year to touch 55 trillion won which was in line with the estimates of the market of 55.6 trillion won.
Stocks if Samsung Electronics surged by 2.3 per cent on the announcement compared to the broader market recording a rise of 1.9 per cent.
Samsung Electronics, the manufacturer of smartphones, TVs, appliances, memory chips and displays, is the first global tech firm that reported its earnings estimates for the first quarter,
For 2020, its smartphone segment – which made up about 47 per cent of the revenues of the company last year, as well as its consumer electronics division will be hit because of the coronavirus pandemic raging throughout the world, Samsung Electronics said last month. The company however also forecast strong growth in demand and sale of chips because of a demand from growth from data centres.
“Even though Samsung’s mobile business was hit by the coronavirus outbreak this quarter, it will likely face bigger challenges in the second quarter - now that the United States and Europe have become the hardest-hit countries,” Kim Sun-woo, an analyst at Meritz Securities, said.
The decision that the company had taken earlier of shifting some of its production base form China to countries including Vietnam and India appeared to have benefited it because there was a severe disruption of supply chains in China soon after the break out of the coronavirus epidemic there at the end of last year.
However the company also had to close down some factories and retail stores in Europe, India and the United States because of the spread of the virus pandemic throughout the globe.
NH Investment & Securities expects that the global sale of Samsung’s premium Galaxy 20 smartphone for the current year will be at about 20 million units which will be significantly lower that the investment firm’s earlier forecast of about 32 million units.
 “If the coronavirus outbreak doesn’t die down in the third quarter, demand for memory chips might face a bump,” said Song Myeong-sup, an analyst at HI Investment & Securities.

Christopher J. Mitchell

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