Samsung forecasts profit rise on coronavirus demand

SEOUL: Samsung Electronics expects higher first-quarter profits this year as millions of people are working from home in coronavirus lockdowns pushing up demand for its chips.

Samsung, the world’s biggest smartphone and memory chip maker, had operations suspended at eleven overseas assembly lines due to the pandemic which has wreaked havoc on the global economy and is widely expected to cause a recession.

The changing behaviour patterns among the vast numbers of people forced to stay at home around the world who have turned to cloud data services have generated a silver lining for the company.

In the first three months, operating profits inched up 2.7 percent from 2019 to around 6.4 trillion won ($5.2 billion), Samsung forecast in an earnings estimate. The figure was ahead of expectations and was based on sales of 55 trillion won, a rise of five percent.

Samsung Electronics is crucial to South Korea’s economic health. It is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled conglomerates known as chaebols that dominate business in the world’s 12th-largest economy.

Shares in the firm closed up 1.8 percent on Tuesday, having fallen nearly 20 percent from a record high in January amid concerns over the coronavirus pandemic and its economic repercussions.Samsung had pinned its hopes for 2020 on a rollout of its new 5G and premium smartphones including its new folding Galaxy Z flip phone to boost purchases.

Global smartphone sales decreased 14 percent in February year-on-year with China seeing nearly a 40-percent decline. Samsung’s key sales regions of North America, Asia and Europe are among the hardest-hit by the virus, Samsung has withheld net profit and sector-by-sector business performance data until it releases its final earnings report, expected later this month.

LG Electronics, South Korea’s second-largest appliance firm after Samsung, also forecast higher first-quarter operating profits, projecting they would reach 1.09 trillion, up 21.1 percent year-on-year.