Samsung Electronics, the world’s largest maker of smartphones and memory chips, announced an increase in its fourth-quarter net profit by more than a quarter on an annual basis on Thursday, as work from home due to the Coronavirus increased demand for devices that operate with its chips.
But the numbers were below market expectations according to Bloomberg News, and the company warned of continued uncertainty over the pandemic and falling profits in the first quarter of 2021 due to lower prices.
Samsung Electronics is the main subsidiary of the giant Samsung Group, by far the largest family-controlled empire known as the chaebols that dominate business in South Korea, which ranks 12th by economy in the world.
Agglomeration is crucial to the economic health of the South – Its total sales volume is equivalent to one-fifth of the national GDP.
Samsung Electronics said its profit rose 26.4% in October-December from a year earlier to 6.61 trillion won, led by the display and memory business.
“Despite the continuing challenges of the Covid-19 pandemic, company-wide efforts to ensure a stable supply of products and services globally helped Samsung’s fourth-quarter results,” the company said in its earnings report.
The Coronavirus has wreaked havoc in the global economy, with lockdowns and travel bans imposed around the world for months.
But the epidemic – That killed more than two million people worldwide – It has also seen many tech companies flourish, including Samsung.
“It is true that Samsung’s sales have increased year on year due to the spread of the so-called” new normal “, which has increased the demand for electronics, said Jane Park, analyst at Counterpoint Research.
Operating profit increased 26.4% to 9.05 trillion won, while sales were up 2.8% to 61.55 trillion won.
However, Samsung indicated that profits were down from the previous quarter due to weak memory prices and slowdown in consumer product sales, as well as higher marketing costs and the appreciation of the Korean won.
It said this trend is likely to continue as profitability in the memory business is affected by the winning power “and costs associated with new product lines, despite strong demand from mobile and data center products.”
It expected a recovery in overall global demand in 2021, but warned that “doubts persist about the possibility of a repeat of the Covid-19 waves.”
For the whole year, net profit jumped 21.5% to 26.41 trillion won, with sales of 236.81 trillion won, up 2.8%.
Shares of Samsung Electronics were down 1.64% in early trade Thursday.
The global chipmaking industry is expected to see record revenue this year, as the stay-at-home economy continues due to the pandemic, according to TrendForce market tracking in Taipei.
Samsung has aggressively ramped up its investment in semiconductors in recent years.
The Wall Street Journal reported last week that the tech giant, as its latest investment, is considering spending up to $ 17 billion to build a chip plant in Arizona, Texas or New York.
If confirmed, this would be Samsung’s largest investment in the absence of its de facto leader Lee Jae-yong.
Lee was sentenced last week to two and a half years in prison on his retrial over a widespread corruption scandal that brought down former president Park Geun-hee.
The ruling led to more uncertainty about Samsung after the burial of its late boss Lee Kun-hee, who turned Samsung Electronics into a world power in October.
Experts say the vacuum in leadership could hinder the company’s decision-making about future large-scale investments, which have been key to its rise.
“Samsung is a very important company for South Korea, and its leader is inconvenient to be imprisoned,” said Kim Dae-jung, a business professor at Sejong University.