"2Q Earnings in the Electric and Electronics Industry Better Than Expected"

Strong Performance Even in Traditional Off-Season... Continued Optimism for Improved Results in the Second Half

Samsung Galaxy S21 Series 3 Models (Provided by Samsung Electronics) [Image Source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The performance of the electrical and electronics sector is expected to exceed expectations even in the traditionally off-season second quarter. It is analyzed that a positive situation will unfold as product demand remains strong and prices even rise.

On the 5th, DB Financial Investment forecasted that the second-quarter earnings of companies in the electrical and electronics sector, including Samsung Electronics, Samsung SDI, Samsung Electro-Mechanics, LG Electronics, LG Innotek, LG Display, and SK Hynix, will surpass market consensus. Researcher Seongryul Kwon explained, "The second quarter is traditionally an off-season for IT companies, so a sharp decline in performance compared to the first quarter is common, but this year, despite very strong first-quarter results, the decline in the second quarter is expected to be gradual, making it possible to exceed consensus," adding, "IT set product demand remains robust, and prices for some products are rising, so the situation is better than expected."

By individual companies, Samsung SDI is expected to see a significant increase in second-quarter operating profit, supported by the turnaround to profitability of its core medium-to-large batteries and an increase in small battery volumes. LG Display is projected to exceed consensus with continuously rising panel prices and a significant increase in large OLED volumes. Samsung Electro-Mechanics is expected to perform well due to rising semiconductor package prices and further improved profitability of multilayer ceramic capacitors (MLCC). LG Innotek is anticipated to more than offset the sluggishness in automotive components with better-than-expected performance in optical solutions and substrate materials. LG Electronics' high growth rates in home appliances and TVs are noteworthy. The increase in the proportion of OLED TVs is expected to bring better-than-expected profitability to the home appliance division.

Expectations for improved performance in the second half of the year remain valid. Global smartphone companies are launching new models, and the introduction of new foldable smartphones is expected to invigorate the market. While the dominant view is that funds will flow into service and 'contact' industries due to the widespread distribution of COVID-19 vaccines, it is analyzed that the benefits gained from replacing IT products and using premium products will not easily diminish.

Researcher Kwon explained, "Regarding IT consumption patterns, although total TV shipments may stagnate due to the expansion of online video services (OTT) like Netflix and improved perception of OLED TVs, the growth trend of premium TVs will continue," adding, "For PCs, the second half is expected to see growth mainly in business PCs as consumer PCs return to workplaces, and smartphones will have additional volumes due to Huawei's collapse and LG Electronics' withdrawal."