Samsung and LG Both Deliver 'Surprise Earnings' in 1Q... Home Appliances Soar (Comprehensive Report 2)

[Asia Economy Reporters Heungsun Kim and Suyeon Woo] Samsung Electronics and LG Electronics both posted 'earnings surprises' in the first quarter of this year, benefiting from the COVID-19 boom. Samsung drove strong performance with increased sales of sets (finished products) such as smartphones and home appliances, while LG broke its all-time highest earnings record in 12 years, thanks to strong sales of TVs and home appliances.

Samsung Electronics, 1Q Revenue 65 Trillion KRW... Near Record High

On the 7th, Samsung Electronics announced that its consolidated financial statements for January to March showed provisional sales of 65 trillion KRW and operating profit of 9.3 trillion KRW. Sales rose 17.48% compared to 55.33 trillion KRW in Q1 2020, and increased 5.61% from 61.55 trillion KRW in the previous quarter. Operating profit increased 44.19% from 6.45 trillion KRW in the same period last year and rose 2.76% from 9.05 trillion KRW in the previous quarter.

The sales figure is close to the record high of 66.96 trillion KRW recorded in Q3 last year, and the operating profit exceeds the market consensus, which had expected around 8.9 trillion KRW, showing strong performance.

The driving force behind Samsung Electronics' strong first-quarter results was the set division, including smartphones, TVs, and home appliances. Although the company did not disclose segment-specific results, the market estimates that the mobile division, responsible for smartphones, posted an operating profit of about 4.5 trillion KRW. This was due to increased demand for the flagship Galaxy S21 and the budget Galaxy A series. Additionally, the consumer electronics (CE) division, which raised interest with premium TVs and customized home appliances 'BESPOKE,' also saw increased sales, achieving an operating profit close to 1 trillion KRW.

Although semiconductor profits fell short of expectations, performance improvement is anticipated from the second quarter due to price increases amid the global supply shortage. Despite rising DRAM prices early in the year, the industry reports that the shutdown of the Austin plant in Texas caused by a cold snap in the U.S. hampered performance, resulting in lower-than-expected results. The semiconductor division's first-quarter operating profit is estimated to be around 3.5 to 3.6 trillion KRW, down from 4.12 trillion KRW in Q1 last year.

LG Electronics Breaks Record for Highest Quarterly Operating Profit in 12 Years Amid COVID-19 Boom

LG Electronics set a new all-time high record in earnings for the first time in 12 years, driven by the home appliance market boom due to COVID-19. This was influenced by the economic recovery and revenge consumption caused by COVID-19, with premium TVs and home appliances leading the surge in sales.

On this day, LG Electronics announced provisional results for Q1 this year with sales of 18.8057 trillion KRW and operating profit of 1.5178 trillion KRW. Sales increased 27.7% year-on-year, and operating profit rose 39.2%, marking the highest-ever results for both sales and operating profit.

This is the first time in 12 years since Q2 2009 (1.2438 trillion KRW) that LG Electronics' quarterly operating profit exceeded 1.2 trillion KRW. In terms of sales, it broke the record set in Q1 2018 (15.123 trillion KRW) after three years.

This strong performance was driven simultaneously by the TV and home appliance divisions. In particular, sales of premium home appliances such as the Objet Collection, OLED TVs, and NanoCell TVs are estimated to have raised the overall average selling price (ASP) of products.

Especially, thanks to new product launches, the home appliance division's operating profit is believed to have surpassed 800 billion KRW for the first time in this quarter. LG Electronics launched the 'LG Whisen Tower' air conditioner with a new design for the first time in six years earlier this year, and the space interior appliance 'LG Objet Collection' continues to maintain steady popularity.

The TV business is also increasing sales this year, marking it as the inaugural year for OLED transition. Market research firm Omdia estimated LG Electronics' OLED TV shipments in Q1 to be about 759,000 units, more than double compared to the same period last year. The global OLED TV market surpassed 2 million units sold for the first time last year and is expected to expand more than twice to about 5.6 million units this year.

Meanwhile, with LG Electronics' sudden decision to withdraw from the chronically loss-making mobile division, performance improvement is expected to accelerate from the second quarter. LG Electronics plans to boldly restructure unprofitable businesses and shift its core focus to new business areas such as automotive parts, robotics, and artificial intelligence (AI).

The industry expects that LG Electronics' automotive parts division could turn profitable in the second half of this year as demand for finished vehicles recovers. The launch of the joint venture 'LG Magna e-Powertrain (tentative name)' with automotive parts manufacturer Magna is also scheduled for July.

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