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Samsung Electronics and LG Expect Q1 Profit to Boost

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The two largest South Korean electronics groups, Samsung Electronics and LG, said Wednesday they expected a 40% jump in operating profit in the first quarter.

Samsung Electronics said it expects an increase of 44.2% in operating profit between January and March, largely due to good sales of smartphones and the launch of its new range, the Galaxy S21. The profit is expected to be 9.3 trillion won (6.9 billion euros), the South Korean giant, the world’s largest maker of memory chips, said in a statement.

Read also: Samsung Electronics optimistic on quarterly profit

For its part, LG Electronics, the second South Korean manufacturer of household appliances after Samsung, forecasts a 39.2% increase in operating profit over the same period to 1.5 trillion won (1.13 billion euros). “Quarterly revenue and operating profit are the highest in company history,” LG said in a statement.

Samsung revenue boosted by telecommuting

Samsung’s figures are well beyond analysts’ expectations, Gloria Tsuen of Moody’s Investors Service told Agence France Presse (AFP), explaining that “the tight stocks in the field of semiconductors, especially memories DRAM ”, had contributed to the performance of the group. The analyst consensus was in the order of 8,880 billion won (6.71 billion euros), according to Bloomberg News.

Samsung Electronics is the flagship of the Samsung group, which is by far the largest of the family conglomerates – the “chaebols” – which dominate the twelfth largest economy in the world. The good health of the group is crucial for that of the South Korean economy since it alone represents 20% of the national GDP.

The coronavirus has wreaked havoc around the world amid lockdowns and travel restrictions. But the pandemic, which has claimed more than 2.8 million lives, has also sparked an economic boom for many tech companies. The global trend towards telecommuting has led to an explosion in demand for hardware powered by Samsung chips, as well as televisions, washing machines and other household appliances.

To read: Samsung Electronics’ profits boosted by teleworking

Samsung Electronics’ revenue in the first quarter is expected to rise 17.5% year on year to 65 trillion won (49 billion euros).

A break from production in Texas

Samsung shares rose 0.23% on Wednesday morning on the Seoul Stock Exchange. That of LG Electronics gained 0.63%. The group has just announced that it is giving up its smartphone business, which has been in deficit for many years.

The semiconductor industry as a whole expects record revenue from telecommuting this year, according to Taipei-based firm TrendForce.

However, Samsung had to contend with the shutdown of semiconductor factories in Texas in February due to power outages caused by a severe winter storm. The group said production was almost back to normal at the end of March, but South Korea’s Yonhap agency said the setback could cost Samsung Electronics 400 billion won (300 million euros) in losses.

Smartphone sales on the rise

However, the performance of Samsung in the first quarter was supported according to Hi Investment and Securities by its smartphone division. Experts agree that the result was boosted by the release of its Galaxy S21 range in January, more than a month ahead of its usual launch schedule. “One of the keys to this success has been its lower starting price, at $ 799,” indicates a study by the specialist firm Counterpoint Research.

About that: The Galaxy S21 Ultra, really ultra

The group is expected to have produced around 62 million smartphones in the first quarter, and claim an 18.1% market share, according to TrendForce. If these estimates hold true, Samsung should regain the lead in the global ranking of smartphone sellers, a place it ceded to Apple in the last quarter of 2020.

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