Samsung posts solid Q4 results, expects weaker Q1

Seoul, Jan 28 Samsung Electronics on Thursday said it expects downbeat first-quarter results on the weak US dollar and uncertainties over the novel coronavirus pandemic after announcing a solid fourth-quarter performance, although demand for chips and smartphones will remain strong.

The company presented a conservative view on a so-called "super cycle" in the memory chip sector that many analysts have predicted to start this year.

The South Korean tech giant said its fourth-quarter net profit increased 26.4 per cent on-year due to firm demand for chips and displays amid the pandemic.

The world's leading memory chip and smartphone manufacturer said its net income stood at 6.6 trillion won ($6 billion) in the October-December period, compared with 5.22 trillion won a year earlier.

Its operating profit jumped 26.35 per cent on-year to 9.04 trillion won in the fourth quarter of 2020, while sales rose 2.78 percent to 61.55 trillion won over the cited period.

But on a quarterly basis, Samsung's fourth-quarter earnings were down from the third quarter performance, when it racked up record sales of 66.9 trillion won and an operating profit of 12.3 trillion won.

Samsung cited that weaker memory prices and sluggish consumer products sales, coupled with higher marketing costs and the Korean won's appreciation against the greenback, dragged down its performance from the third quarter.

"The local currency's value rose sharply against the U.S. dollar, euro and key emerging market currencies, resulting in a loss of about 1.4 trillion won compared with the previous quarter, mostly in semiconductor and display businesses," it said.

For 2020, Samsung posted a net income of 26.4 trillion won, up 21.48 percent from a year ago, as its cash cow semiconductor business benefited from the stay-at-home trend caused by the novel coronavirus pandemic, while its end-product businesses, such as smartphones and home appliances, got a boost from pent-up demand when lockdowns were relaxed, reports Yonhap news agency.

Looking ahead, Samsung expects its profitability to drop in the first quarter of 2021 due to currency effects and weak seasonality of its end-product businesses.

"The memory business will likely continue to be affected by the ongoing strength in the (Korean) won and costs associated with new production lines, despite solid demand from mobile products and data centers," the company said.

For the whole of 2021, Samsung projected a recovery in overall global demand but emphasized that uncertainties still remain over the COVID-19 pandemic.

Samsung said its memory business, specifically the DRAM market, is projected to see a recovery during the first half on the back of strong demand from mobile and server applications.

However, the company pointed out that global uncertainties remain, such as geopolitical risks, and that demand could fluctuate.

Samsung said OLED displays accounted for more than 80 per cent of its panel sales last year, with its sales volume increasing by about 50 per cent.