Samsung Q1 profit remains stable thanks to memory demand but COVID-19 looms

Second quarter smartphone sales and profits are expected to suffer due to the global pandemic.
Written by Cho Mu-Hyun, Contributing Writer

Samsung Electronics has posted an operating profit of 6.45 trillion won from revenue of 55.3 trillion won for the first quarter of 2020, the company said on Wednesday.

It is a rise of 3.4% and 5.6%, respectively, from a year prior, with Samsung attributing the positive results to a surge in demand for memory in PCs and servers.

The semiconductor business contributed almost 4 trillion won to the company's operating profit, thanks in large part to continued investments in 5G infrastructure and an increased demand for cloud applications due to the rapid rise of remote working, online education, and streaming services during the COVID-19 pandemic.

Demand for DRAM was especially high and it is expected to "remain firm" throughout the second quarter, the South Korean tech giant said.

Meanwhile, the company's mobile business contributed 2.65 trillion won, which was stronger than the results of the previous quarter and the year prior, at 2.52 trillion and 2.27 trillion won, respectively.

Smartphone shipments declined, however, due to the impact of COVID-19, but the average sales price of Samsung's flagship smartphones increased as a result of higher-than-expected demand for the Galaxy S20 Ultra and solid sales of its foldable phone Galaxy Z Flip, the company said.

Despite its strong performance, Samsung noted that demand for smartphones is expected to "drop sharply" in the second quarter and the economic downturn caused by COVID-19 would have a direct impact on the mobile business' performance.

It added that moving forward it would focus on improving cost efficiencies and mitigating against any disruptions in its production facilities by utilising its diversified manufacturing capabilities across the globe.

While Samsung's semiconductor and mobile businesses continued to hum along in spite of COVID-19, its display business did not share the same experience. The display business reported an operating loss of 290 billion won due to a sales decline in mobile displays.

Further drops are expected with falling demand for smartphones in the US and Europe.

Samsung's consumer electronics business also experienced a drop, contributing only 450 billion won in operating profit -- down from the 540 billion won recorded a year prior. Like display panels, demand for TVs began to drop in March due to the COVID-19 pandemic, the company said.

With the cancellation of major global sporting events and the postponement of the Tokyo Olympic Games, demand for TVs is expected to continue its decline in the second quarter. 

Samsung said it would utilise online sales channels to minimise these impacts.


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