Samsung posts highest-ever quarterly revenue in Q3 2020

Samsung predicts fourth-quarter decline in profits due to weak demand and growing competition

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Samsung has reported KRW 66.96 trillion in consolidated revenue and KRW 12.35 trillion in operating profit for the third quarter ended September 30, 2020, reporting its highest-ever quarterly revenue.

Quarterly operating profit rose 52 percent from the previous quarter, thanks to a boost in demand for smartphones and consumer electronics as well as efficient cost management. Third-quarter operating profit was also 59 percent higher year-on-year on stronger sales of memory chips and consumer products.

The Memory Business posted solid earnings as healthy demand for mobile and PC products led to higher-than-expected shipments, outweighing the impact of lower memory chip prices. The System LSI Business also saw profit rising over demand for mobile phone components, while the Foundry Business benefitted from increased orders for high-performance computing (HPC) chips and other applications.

The Display Panel Business reported higher profit quarter-on-quarter led by growing mobile display sales on customers’ new product launches and improved supply-demand environment for large panels.

A near 50 percent jump in sales of smartphones including new flagship products, coupled with improved cost management, lifted earnings at the Mobile Communications Business from the previous quarter. The Consumer Electronics Division also witnessed a sharp growth in sales of premium TVs and appliances, supported by flexible management of supply chain and sales channels.

Looking ahead, Samsung expects profit to decline in the fourth quarter amid weakening memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics, the company said in a statement.

Soft prices in server memory due to customers’ inventory adjustments will likely weigh down the Memory Business despite stable demand for mobile and laptop memory. The System LSI Business will begin supplying 5-nm 5G system-on-chips (SoCs) in earnest and the Foundry Business expects increased demand for HPC chips and mobile SoCs. In displays, mobile panel sales are set to rise significantly from the third quarter.

The Mobile Communications Business is likely to see smartphone sales decline and marketing costs increase due to competitive market environment. In Consumer Electronics, profitability is expected to weaken on growing competition and rising costs, despite solid demand.

The Company’s capital expenditures in the third quarter stood at KRW 8.4 trillion, including KRW 6.6 trillion spent on semiconductors and KRW 1.5 trillion on displays.

The Semiconductor businesses posted KRW 18.8 trillion in consolidated revenue and KRW 5.54 trillion in operating profit in the third quarter.

Overall demand in the Memory Business was better than expected as demand for mobile applications began to recover, even as demand for servers was somewhat weaker than the first half.

Earnings for the System LSI Business improved on the back of a recovery in mobile components, including CIS and SoCs. Display-related products especially showed significant growth as demand for tablets and laptops increased.

The Foundry Business achieved record quarterly revenue on the back of a recovery in mobile demand and increased demand for HPC chips. The Company has established a position for future growth by beginning the shipment of 5-nm mobile products and 2.5D packages.

The Display Panel Business posted KRW 7.32 trillion in consolidated revenue and KRW 0.47 trillion in operating profit for the third quarter. Its earnings improved driven by increasing sales of smartphone, TV and monitor panels, despite the impact of COVID-19.

Mobile display earnings rose as recovering demand from major customers for smartphone screens lifted utilization rate. Losses from large displays narrowed slightly QoQ on increasing panel prices and higher sales of ultra-large TV and high-performance monitor panels.

The IT & Mobile Communications Division posted KRW 30.49 trillion in consolidated revenue and KRW 4.45 trillion in operating profit for the third quarter.

The Company’s smartphone sales rose sharply from the previous quarter, with the launch of new flagship models such as the Galaxy Note20 and Galaxy Z Fold2, as well as stronger sales of mass-market models in key regions including India.

Efficient cost management through component standardization and reduction in marketing expenses led to a significant improvement in profitability. Sales increase in tablets and wearables including the Galaxy Tab S7, Galaxy Watch3 and Buds Live also contributed to the profit growth in the third quarter.

The Consumer Electronics Division, comprised of the Visual Display and Digital Appliances businesses, recorded KRW 14.09 trillion in consolidated quarterly revenue and KRW 1.56 trillion in operating profit.

Demand for TVs surged both QoQ and YoY as the “At-home” trend buoyed sales of high-resolution home cinema. The Company responded to the strong demand in time with online marketing and global SCM capabilities, increasing sales in QLED, super large screen TVs and Lifestyle TVs.

The Digital Appliances Business saw growth in the third quarter from recovering sales of premium line-up including Bespoke refrigerator and Grande AI washer/dryer. Increased sales of dryers and Air Dressers (garment refreshers) also helped, as COVID-19 raised consumers’ interest in better hygiene.

In the third quarter, Samsung Electronics’ capital expenditure reached KRW 8.4 trillion, including KRW 6.6 trillion spent on semiconductors and KRW 1.5 trillion on displays. The cumulative total for the January-September period is KRW 25.5 trillion, with KRW 21.3 trillion allocated to semiconductors and KRW 3.1 trillion to displays.

The full-year capital expenditure is expected at approximately KRW 35.2 trillion, including KRW 28.9 trillion allocated to semiconductors and KRW 4.3 trillion to displays.

Samsung said it expects a decline in profit in the three months that will end on Dec. 31 due to weak memory chip demand and intense competition in the smartphone and consumer electronics spaces

Samsung Earnings Release Q3 2020

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