SEOUL (SOUTH KOREA) – Samsung Electronics Co Ltd said on Thursday that due to weak server chip demand and soaring smartphone competition, its fourth-quarter profit would fall. This comes after it posted its best quarterly operating profit in two years in Q-3.
The top manufacturer of smartphones and memory chips flagged a recovery in the mobile and chip markets in 2021. However, it was wary of disruption from the pandemic and tensions between the US and China in the trade segment.
“Global demand is forecast to increase year on year, but uncertainties are unlikely to ease given the possibility of additional waves of the pandemic,” said Ben Suh, Samsung’s executive vice president of investor relations.
The firm said the demand for mobile chips would go up in the fourth quarter as customers in China bolster orders in the wake of US curbs on Huawei Technologies Co Ltd. Given the large customer inventories, server chip demand would remain weak.
“After the US restrictions against Huawei took effect in earnest, demand from Chinese customers has increased,” said Han Jin-man, senior vice president of memory chip business.
The firm has applied for its licence in the US to export chips to Huawei and it still awaiting the result, Han said.
Its operating profit in the July-September period spiked 59% to reach 12.35 trillion won ($11 billion).
There was a near 50% spike in smartphone sales in third quarter and it reflected gains in Samsung’s share of the market. This comes as its rival Huawei lost market share because of sanctions imposed by the US. Lower marketing costs amid the pandemic were also a factor, said analysts.
The firm said its chip profit climbed 82% to 5.54 trillion won compared with a year earlier. Higher sales of low- and mid-end smartphones and inventory buildup from Huawei ahead of the curbs imposed by the US offset weak demand from servers.
In the current quarter, Samsung’s smartphone shipments are slated to drop about 5% when compared with the previous period given the competition from Apple’s newest iPhone 12 and a lack of new Samsung flagship models.
