Samsung Electronics to Announce Q1 Earnings on 7th
Operating Profit Expected to Rise 1.5% YoY...Smartphone Slump Offset by Semiconductors
Future Outlook Divided Between Smartphone Sales Decline and Semiconductor Demand Growth
[Asia Economy Reporter Minwoo Lee] The first-quarter earnings announcements for semiconductor stocks such as Samsung Electronics and SK Hynix are just around the corner. As this is the first report card affected by the novel coronavirus disease (COVID-19), it is attracting attention as an indicator that can gauge this year's performance.
According to the securities industry and financial information provider FnGuide on the 2nd, Samsung Electronics will announce its preliminary first-quarter earnings for this year on the 7th. The consensus estimate for Samsung Electronics' first-quarter earnings is sales of 55.7762 trillion KRW and operating profit of 6.3238 trillion KRW. This represents an increase of 6.5% and 1.5%, respectively, compared to the same period last year. Despite production disruptions caused by the impact of COVID-19, it is considered a solid performance compared to last year, which was sluggish due to falling prices of memory such as DRAM and the US-China trade dispute.
In particular, growth in the semiconductor sector offset the sluggishness in the smartphone sector. With the increase in remote work and video conferencing due to COVID-19, demand for memory in servers and data centers increased. According to the Ministry of Trade, Industry and Energy, semiconductor exports in March decreased by 2.7% compared to the previous month. Although this was weaker compared to the 9.4% increase in February driven by rising DRAM prices, it is seen as a decent result considering concerns about a large-scale economic slowdown due to COVID-19.
SK Hynix is also expected to announce its first-quarter earnings around mid-month. The securities industry estimates first-quarter sales at 6.8072 trillion KRW and operating profit at 451.6 billion KRW. Earlier this month, operating profit forecasts were lowered to the 200 billion KRW range, but expectations revived due to increased semiconductor demand from 'social distancing.' Hanwha Investment & Securities projected operating profit up to 600 billion KRW.
Opinions on future prospects are divided. There is analysis that concerns over a global economic contraction centered on the US and Europe, where COVID-19 is spreading, will lead to decreased exports and negatively impact overall earnings. In particular, there are significant concerns that if sluggish smartphone sales due to global travel restrictions between countries intensify from the second quarter, demand for mobile DRAM will sharply decline. However, some opinions suggest that increased memory demand due to expanded social distancing and the commercialization of 5G will offset this, maintaining a trend similar to the first quarter.
Researcher Soobin Lee of Daishin Securities analyzed, "Samsung Electronics' annual operating profit this year is expected to reach 35.1 trillion KRW, a 25% increase from last year," adding, "Although the previous estimate was revised downward by 11%, server memory demand will compensate for the weakness in smartphone memory demand."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
