Samsung Electronics Overcomes COVID-19 Challenges with Operating Profit of KRW 35.9939 Trillion Last Year... Fourth Highest Ever (Comprehensive)

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[Asia Economy Reporter Kim Heung-soon] Samsung Electronics recorded the fourth highest operating profit ever last year despite the COVID-19 pandemic. This was thanks to the surge in demand for home appliances and IT products due to the spread of untact (contactless) services and the 'pent-up effect' as suppressed consumer sentiment revived.

Samsung Electronics announced on the 28th that its operating profit last year was 35.9939 trillion won, an increase of 29.62% compared to the previous year. Sales rose 2.78% year-on-year to a total of 236.807 trillion won. The annual operating profit was the fourth highest after 2013, 2017, and 2018, and sales ranked third highest ever.

In the fourth quarter of last year, operating profit was 9.047 trillion won, and sales were 61.5515 trillion won. Compared to the same period in 2019, these increased by 26.35% and 2.78%, respectively.

By division, the semiconductor division recorded sales of 18.18 trillion won and operating profit of 3.85 trillion won in the fourth quarter of last year. Although the overall market conditions for semiconductors were favorable throughout last year, prices of memory semiconductors such as server DRAM declined somewhat in the fourth quarter, and the won's appreciation against the dollar reduced operating profit by about 1.7 trillion won compared to the third quarter of last year (5.54 trillion won). Components such as semiconductors and displays, which are mostly produced domestically, are more affected by exchange rates than home appliances and mobile phones, which have a higher proportion of overseas factory production.

The mobile (IM) division's operating profit decreased to 2.42 trillion won from over 4 trillion won in the previous quarter. This is attributed to the success of Apple's new iPhone 12, released at the end of October last year, and increased year-end marketing expenses. However, the display division posted an operating profit of 1.75 trillion won in the fourth quarter due to increased demand for smartphones and TVs. The TV and home appliances (CE) division also recorded an operating profit of 820 billion won, driven by pent-up demand centered on advanced markets during the year-end peak season.

Samsung Electronics' capital investment last year totaled approximately 38.5 trillion won, a 43% increase compared to 2019. By business, semiconductor investment reached 32.9 trillion won due to investments in advanced memory factories and foundry EUV 5-nanometer process expansion, while the display division invested 3.9 trillion won to expand QD display production capacity.

Samsung Electronics expects improved performance in the mobile division in the first quarter of this year due to the early launch of the Galaxy S21, but overall company profitability is expected to decline due to deteriorating performance in the components businesses such as memory and display. Despite demand recovery in semiconductors including memory and data centers, performance is expected to decline due to exchange rate effects and initial costs of new production lines.