Robust chip sales help Samsung’s Q1 2020 profits rise despite COVID-19 crisis
Samsung has announced its earnings guidance for the first quarter of 2020 earlier today, and the company said that its sales will rise compared to the first quarter of last year. However, the numbers won’t be quite as strong as what analysts had initially expected. Samsung’s shares were up 1.5% in South Korea after the earnings guidance was made public.
According to the company’s press release, Samsung expects consolidated sales of KRW 55 trillion ($44.9 billion) and an operating profit of KRW 6.4 trillion ($5.2 billion). The profits are up 2.73 percent compared to the numbers from Q1 2019. While the company’s latest earnings are higher compared to the first quarter of last year, analysts had predicted slightly higher numbers than Samsung’s own estimates.
Last year, the South Korean firm reported sales of KRW 52.39 trillion ($42.8 billion) and an operating profit of KRW 6.23 trillion ($5.1 billion). Samsung reported an operating margin of just 11.6 percent for the latest quarter, which is lowest since the third quarter of 2016. The company is expected to have shipped just 60 million smartphones in Q1 2020 compared to 72 million in Q1 2019.
Strong chip sales cushioned the smartphone sales drop
The Galaxy S20 series has been selling quite poorly. Samsung had predicted last month that its revenues from smartphones and consumer electronics would take a hit due to the COVID-19 situation. However, the South Korean company said that it expected the demand from data centers to make up for the losses in the consumer electronics business.
While Samsung didn’t reveal the breakdown of its earnings, more than KRW 4 trillion ($3.27 billion) of the company’s operating profit is said to have come from the chips business. More people have started working from home during the lockdown period, which led to the rise in demand from data centers that support team collaboration software, video conferencing tools, and video streaming services.
The company’s mobile business is bracing for a bigger hit in Q2 2020 as consumers hold off making big-ticket purchases after looking at the grim economic situation worldwide. Samsung was initially expected to sell 300 million smartphones, but analysts have cut the estimates to 260 million.
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