Surprise Samsung Electronics... Q3 Operating Profit 12.3 Trillion Won

Record Quarterly High in 2 Years
Thanks to Pent-up Demand and Huawei Special
Offsetting COVID-19 and DRAM Price Drops
Sales Reach 66 Trillion, Highest Quarterly Ever

[Asia Economy Reporter Kim Hyewon] Samsung Electronics continued its 'earnings surprise' in the third quarter of this year, greatly exceeding expectations despite the COVID-19 pandemic. Operating profit surpassed 12 trillion won, the largest scale in two years, and sales are expected to set a new quarterly record. The set (finished products) business, including smartphones, TVs, and home appliances, showed better-than-expected sales due to the pent-up effect, and although the decline in DRAM prices was a negative factor in the core semiconductor sector, the pre-order effect from the U.S. sanctions on China's Huawei offset the shock, according to analysis.

Samsung Electronics announced on the 8th that its consolidated operating profit for the third quarter of this year was tentatively estimated at 12.3 trillion won. This is an increase of 58.1% compared to the same period last year and 51% compared to the previous quarter. It is the first time in seven quarters since the fourth quarter of 2018 (10.8 trillion won) that quarterly operating profit exceeded 10 trillion won. It is also the largest amount since the third quarter of the same year (17.57 trillion won).

Samsung Electronics' third-quarter operating profit exceeded market expectations by more than 19%. According to financial information firm FnGuide, the consensus forecast by securities firms over the past month was around 10.28 trillion won. Sales reached 66 trillion won, slightly surpassing the previous quarterly record of 65.98 trillion won in 2017. However, this figure is provisional, and whether it is the highest ever will be determined by the finalized figures announced at the end of this month. The operating profit margin, which is the ratio of operating profit to sales, was 18.6%, the highest since the fourth quarter of 2018 (24.2%).

Samsung Electronics' strong third-quarter performance was largely due to balanced growth across all business divisions despite the impact of COVID-19. First, the IT & Mobile (IM) and Consumer Electronics (CE) divisions drove the surprise results. The Huawei-related special demand caused by U.S. sanctions and stockpiling also acted as a short-term positive factor.

Despite the COVID-19 variable, Samsung Electronics, which is maintaining unexpectedly good results this year, views the fourth quarter and the first quarter of next year as a tough period for the semiconductor industry. The sharp decline in prices of its main product, memory semiconductors, is the biggest negative factor. Finding alternative trading partners to replace Huawei is also urgent.

An industry insider said, "Semiconductor prices ultimately reflect market demand," adding, "Starting from the fourth quarter, price weakness due to sluggish demand may continue into the first quarter or the first half of next year." However, the solid demand for IM and CE products due to the activation of the untact economy caused by COVID-19 and the recovery trend in the display industry are positive signs. As of today, securities firms estimate Samsung Electronics' fourth-quarter sales and operating profit to be around 63 trillion won and 5 trillion won, respectively.

This content was produced with the assistance of AI translation services.