Samsung Electronics sees profit decline on weaker chip demand after strong third-quarter earnings

SEOUL (Reuters) – Samsung Electronics Co Ltd 005930.KS said on Thursday it expects profits to fall in the current quarter after posting its highest operating profit in two years for the third quarter.

FILE PHOTO: A woman wearing a protective face mask uses her mobile phone as she walks past a Samsung brand store in central Kyiv, Ukraine July 9, 2020. REUTERS/Valentyn Ogirenko/File Photo

The world’s top maker of smartphones and memory chips posted a 59% jump in operating profit in the July-September quarter, on the back of its second-largest quarterly smartphone profit ever at 4.45 trillion won, the company said.

A near 50% jump in sales of smartphones likely reflects gains in Samsung’s share of the market as U.S. restrictions hit Chinese rival Huawei Technologies Co Ltd [HWT.UL], analysts said.

Lower marketing costs amid the coronavirus pandemic were also a likely factor, analysts said.

Samsung said its chip profit surged 82% to 5.54 trillion won in the third quarter from a year earlier, as higher sales of low- and mid-end smartphones and inventory buildup from Huawei ahead of U.S. sanctions offset weak demand from servers.

Operating profit in the third quarter was 12.35 trillion won ($10.96 billion) from 7.78 trillion won a year earlier, in line with the company’s estimate earlier this month.

Revenue climbed 8% to 66.96 trillion won. Net profit rose 49% to 9.36 trillion won.

But in the current quarter, overall memory chip prices are expected to remain weak as oversupply and a lack of recovery in server demand continues, said Avril Wu, analyst at researcher TrendForce.

Samsung’s smartphone shipments in the current quarter are expected to drop about 5% compared to the third quarter due to competition from Apple’s newest iPhone 12 and a lack of new Samsung flagship models, analysts said.

Samsung’s shares fell 1.4% in early trade on Thursday, compared to the wider market’s .KS11 1.3% fall.

Reporting by Joyce Lee and Hyunjoo Jin; Editing by Stephen Coates