Samsung Elec reports 14% profit gain and 60% capex surge in H1

2020.07.30 10:32:20 | 2020.07.30 15:31:06

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[Updated with conference call remarks]

Samsung Electronics Co. saw operating profit in the first half gain 14 percent thanks to its best chip earnings in almost two years, with facility spending up by nearly 60 percent.

The Korean technology giant said it spent 17.1 trillion won ($14.4 billion) in the first six months of the year, up from 10.7 trillion won in the year-ago period, to respond to increased chip demand from applications relating to remote work and online education during the pandemic.

Capital expenditure in the second quarter reached 9.8 trillion won, including 8.6 trillion won on semiconductors and 800 billion won on displays.

“Investment in memory chips was focused on upscaling to finer process technology and capacity expansion to meet anticipated growth in memory demand,” Ben Suh, executive vice president and head of investor relations at Samsung Electronics, said in the earnings call.

For the foundry business, investment mostly went into advanced 5nm and 8nm processes to boost production capacity, he said.

Samsung Electronics’ consolidated operating profit for the quarter ended June came to 8.15 trillion won, up 23.5 percent from a year earlier and 26.4 percent from the previous three months. The final results were slightly higher than the 8.1 trillion won guidance released earlier this month.

Revenue totaled 52.9 trillion won, revised up from the preliminary figure of 52 trillion won. Sales were down 5.63 percent from a year ago and 4.26 percent versus the previous quarter due to reduced sales of smartphones and other devices.

Shares of Samsung Electronics closed Thursday unchanged from the previous session at 59,000 won.

For the first half of 2020, operating profit rose 13.7 percent to 14.6 trillion won while sales slipped 0.2 percent to 108.3 trillion won.

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The semiconductor unit earned 5.43 trillion won in the second quarter, its best figure since the fourth quarter of 2018. Profit was up 2.03 trillion won from a year earlier and 1.43 trillion won from the previous three months.

While demand for mobile was relatively weak, the chipmaker said it benefited from the increased demand for memory chips used in data centers and laptops as the coronavirus pandemic had more people working and learning from home.

Its foundry business also posted record quarterly and half-year revenue as customers bulked up inventories.

Samsung Electronics refrained from giving a forecast of future DRAM prices, unlike its smaller domestic rival SK Hynix Inc., which in its earnings call last week projected prices to bottom out in the second half before strengthening in the first quarter of 2021.

“Given the multiple uncertainties, including the COVID-19 situation, rising trade tensions and a potential change in the inventory levels of suppliers and customers, it’s difficult to tell when the price inflection point will be,” Han Jin-man, senior vice president of Samsung’s memory business unit, said in the call.

The display panel business posted an operating profit of 300 billion won, swinging from a loss in the previous quarter thanks to a near 1-trillion-won redemption from Apple for reduced OLED orders due to poor iPhone sales.

The IT & mobile communications unit’s operating profit was 1.95 trillion won, down from 2.65 trillion won in the first quarter when it released its first foldable smartphones but up from 1.56 trillion won a year ago. Despite weaker smartphone sales, its profitability slightly improved on marketing cost reductions and other cost optimization efforts.

The consumer electronics division generated 730 billion won in operating profit, gaining 50 billion won on year and 28 billion won on quarter, on solid sales of air conditioners and dryers as well as premium QLED TVs amid the stay-at-home environment.

Dividends for the second quarter were set at 354 won apiece for both common and preferred shares, one-fourth of its planned annual dividend spending.

By Kim Hyo-jin

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