SEOUL: Samsung Electronics flagged a nearly 60% rise in third-quarter operating profits Thursday, largely driven by strong smartphone sales boosted by US sanctions against its rival Huawei.
The South Korean tech giant said in an earnings estimate that it expected operating profit to be 12.3 trillion won for July to September, up from 7.8 trillion won in the same period last year.
The prediction was in line with analyst forecasts.
Samsung was projected to post around 10.3 trillion won in third-quarter operating profit, according to market researcher FnGuide.
Samsung Electronics is crucial to South Korea’s economic health.
It is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled conglomerates known as chaebols that dominate business in the world’s 12th-largest economy.
Its overall turnover is equivalent to a fifth of the country’s gross domestic product.
Analysts say the firm’s strong third-quarter performance was largely led by its mobile business, which enjoyed a boost from US sanctions on Huawei.
A Washington ban on foreign companies providing Huawei with US-origin technology came into effect on Sept 15, cutting off essential supplies of semiconductors and software needed for making smartphones and 5G equipment.
Kang Min-soo, an analyst at Counterpoint Research, said US sanctions against Huawei were becoming “a big factor” affecting the global smartphone market.
“For Samsung, it will be a good opportunity to increase market share in Europe, where it has been competing with Huawei in various price bands,” he added.
Looking forward, analysts said falling chip prices could put a damper on Samsung’s performance in the final quarter of the year.
Samsung is the world’s biggest manufacturer of memory chips and led the DRAM market with 43.5% share in the April-to-June period, according to market researcher TrendForce.
But server DRAM chips – which enjoyed a boost from the pandemic that prompted working from home and online classes – were experiencing “significant oversupply”.
“Therefore, contract prices of server DRAM products continue to descend to new lows,” TrendForce said in a report, forecasting a 13% to 18% drop in the fourth quarter.
Adding to Samsung’s challenges, vice-chairman and de facto leader Lee Jae-yong is being retried over a sprawling corruption scandal that could see him return to prison.
He is not being held in custody during the proceedings, but a guilty verdict could deprive the firm of its top decision maker.
Samsung withholds net profit and sector-by-sector business performance data until it releases its final earnings report, expected later this month.
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