Samsung Electronics’ better-than-expected profit revives hope that a surge in Internet usage from people sheltering in place during the COVID-19 pandemic will help make up for a drop-off in demand for smartphones and other consumer electronics.
Shares in Korea’s largest company climbed more than 3% after it posted an operating profit of 6.4-trillion won (US$5.2-billion) in the March quarter, surpassing the average analyst estimate by 3.6%. Sales rose 5% to 55-trillion won, according to preliminary results released on Tuesday. The company didn’t provide net income or break out divisional performance, which it will do later this month when it releases final numbers.
Samsung one of the first major technology corporations to unveil March quarter results — demonstrates how the novel coronavirus outbreak is exerting an uneven impact on the global electronics sector in the short term. Soaring online activity from gaming to video streaming is driving sales of semiconductors the lubricant for the Internet and Samsung’s most profitable business even as worsening employment prospects curtail spending on gadgets such as the company’s just-released flagship Galaxy S20.
The Asian giant’s solid performance underscores expectations for resilient chip demand since Micron Technology’s stronger than anticipated outlook. That lifted Asian chip makers such as Taiwan Semiconductor Manufacturing Co and Nanya Technology. Much now hinges on whether governments can mitigate the fallout from potentially the worst global economic shock in at least a generation.
“Right now, we can only project a picture of the second quarter: soaring demand in server chips may offset slump in the display, mobile, and consumer electronics,” said Song Myung-sup, analyst at HI Investment & Securities in Seoul. “The problem is, if the COVID-19 pandemic continues further, we can’t guarantee that the uptrend in expansion of servers will be sustainable in the second half of this year.”