Samsung Profit Rises 26% on Continued Pandemic-Driven Demand
28 January 2021 - 12:31PM
Dow Jones News
By Elizabeth Koh
SEOUL -- Samsung Electronics Co. reported a 26% boost in its
fourth-quarter net profit Thursday, as the world's largest maker of
smartphones and memory chips continues to ride sustained demand for
its products amid the coronavirus pandemic.
But the South Korean tech giant faces extra challenges as it
enters a new year. Beyond the pandemic, the company is contending
with its de facto leader Lee Jae-yong being back behind bars. And
its rivals, for handsets and semiconductors, are consolidating and
getting larger.
Samsung posted 6.61 trillion South Korean won, or nearly $6
billion, in net profit for the quarter ended Dec. 31, over last
year's 5.23 trillion won. Revenue rose to 61.55 trillion won from
the prior year's 59.88 trillion won.
Analysts had forecast about 6.74 trillion won in net profit and
61.21 trillion won in revenue, according to estimates from S&P
Global Market Intelligence.
Like other technology companies, Samsung has fared well in the
pandemic on the strength of demand for most consumer electronics,
though economic pressures squeezed smartphone sales in the first
half of last year. The company is closely watched in the technology
world, as a major manufacturer of appliances and computing devices
as well as a critical supplier to other electronics firms.
The company warned of weaker earnings in the opening quarter of
2021, though it signaled it expected growth in the first half of
the new year.
In handsets, Samsung has recovered from most of the dent created
by pandemic-fueled store closures early last year. Just two weeks
ago, the company launched its newest flagship phone, the Galaxy
S21, at a marked discount from previous years, trying to capture
market share from Huawei Technologies Co. while the Chinese firm is
cut off from its chip supply by U.S. sanctions.
But Samsung's release, which moves up the sales window for the
company's newest offerings by more than a month, is the most
aggressive the company has been in recent years and signals the
pressure the pandemic continues to put on smartphone recovery, said
Wayne Lam, a senior director of research at CCS Insight, a market
researcher.
"You can look back in history -- they've only been adding cost
and adding to the overall phone price," Mr. Lam said. "Now they're
giving themselves a haircut."
The smartphone market could also shift more to benefit Samsung
-- or other rivals -- if LG Electronics Co. sells off its
smartphone division, which has been bleeding money for nearly six
years. LG, based in Seoul, remains a main competitor for the U.S.
market, though it has lost ground against Samsung and Apple Inc.
This month, LG's chief executive told employees it was "leaving all
possibilities open" for the future of the unit.
Samsung's memory division saw prices fall in the fourth quarter,
after demand from servers and cloud computing centers began to
taper and a stronger Korean won dinged earnings. But memory prices
are likely to rise again in the first half of 2021, industry
analysts said, particularly amid a global chip shortage and rising
demand from sectors like the automotive industry.
Samsung is also considering longer-term investments to shore up
its chip manufacturing, as competitors have consolidated in recent
months. It has been scouting locations in Arizona, Texas or New
York, where it might invest as much as $17 billion, The Wall Street
Journal reported last week.
But major moves at Samsung are in new turmoil now that Mr. Lee,
officially Samsung's vice chairman, is back in prison after a
retrial on charges of bribing South Korea's former president. Mr.
Lee and his lawyers declined to appeal the ruling Monday, which
sentenced him to an additional year and a half in prison after time
previously served.
In an internal Tuesday message posted by Samsung's three CEOs,
Mr. Lee apologized for "causing worry" and asked employees to
continue working "to make investments, create jobs and fulfill
[Samsung's] social responsibilities."
Write to Elizabeth Koh at Elizabeth.Koh@wsj.com
(END) Dow Jones Newswires
January 27, 2021 20:16 ET (01:16 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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