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SINGAPORE – Samsung Electronics said on Thursday that it expects a decline in profit in three months that will end on 31 December due to weak memory chip demand and intense competition in smartphones and consumer electronics.
The world’s top smartphone maker announced a 59% year-over-year jump in operating profit to 12.35 trillion Korean wins (about $ 10.89 billion) for the July-September quarter, consistent with earlier guidance. Samsung said this was partly due to increased demand for smartphones and consumer electronics – smartphone sales, including new flagship models such as the Galaxy Note 20, saw sales increase by nearly 50%.
Samsung shares fell as much as 2.2% on Thursday, leading to an overall decline in the South Korean market, where the Cospi index was down 1.72% due to a sharp sell-off on Wall Street a day earlier.
“Looking ahead, Samsung Electronics expects a decline in profit in the fourth quarter amid reducing memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics,” the company said in a statement.
The low prices of memory chips used by servers in data centers are likely to be based on the main profit-making semiconductor business in the last three months of 2020. The demand for chips used for smartphones, personal computers and graphics processing units, chips used for gaming consoles and games PCs, is predicted to increase, Samsung said.
According to the South Korean tech giant, the mobile business will see a decline in smartphone sales.
Analysts say competition is likely to increase as the new Apple iPhone 12 and iPhone 12 Pro are set to take some market share from the South Korean smartphone maker in the fourth quarter. But Samsung’s display unit, which counts Apple as a customer, is set to see a significant increase in mobile panel sales from the third quarter due to new smartphone launches, according to the South Korean tech giant.
Sanjeev Rana, a senior analyst at brokerage firm CLSA, said he was very excited about Samsung’s performance in 2021.
Rana said in CNBC’s “Squawk Box Asia” on Thursday, “Samsung has retained the ‘Buy’ (rating) for the simple reason that next year we expect a profit growth of 30%. This is a 43% increase in semiconductor profit. % Will be behind the recovery. ” After the earnings announcement.
He said that the average selling price for memory chips in the first three months of 2021 would continue to decline and prices would increase in subsequent quarters. Rana said Samsung is expected to perform well in the smartphone business due to the increase in online sales.
“Next year, we think Samsung will be good for foldable phones as well,” he said.
For the next year, Samsung predicted an improvement in overall global demand, but said uncertainties over the coronovirus epidemic would remain.