Samsung Q1 profits buoyed by robust chip sales

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Samsung just shipped the first batch of DRAM produced with EUV technology.
Image: Samsung

Samsung posted better-than-expected preliminary first-quarter earnings results on Monday, likely due to a COVID-19 prompted surge in chip sales. The South Korean conglomerate revealed it generated 55 trillion won ($45.36 billion) in sales in Q1 2020, up 5 percent year-over-year. The company also announced it made 6.4 trillion won ($5.27 billion) in operating profit during the last quarter, which beat analyst estimates by 3.6 percent.

Memory Chips Sales Boosted Samsung’s Q1 Earnings

The electronics giant won’t release detailed earnings information until later this month, but market researchers have attributed its Q1 performance to a sharp uptick in semiconductor sales.

Last month, the corporation said its component revenue would be strong this year despite the impact of the coronavirus pandemic. Indeed, Zacks Investment Research noted the company’s DRAM and NAND RAM sales have surged because data centers need memory chips to meet with massive increases in bandwidth consumption.

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Similarly, the organization reports laptop makers have ramped up their memory module purchases to supply newly transitioned work from home employees with the equipment they need.

The COVID-19 driven spike in chip sales has also helped make Samsung’s products more valuable. InSpectrum Technologies reports the price of 32-gigabit DRAM server modules rose by around 12 percent in the first quarter. The organization also notes 128-gigabit MLC NAND units have experienced a 5.6 percent cost jump.

Notably, Micron, another leading memory chip manufacturer, posted expectation beating quarterly earnings in March because of robust sales of its core products. Samsung’s similarly resurgent semiconductor revenue indicates pandemic prompted demand is a rising tide for component makers.

Furthermore, the South Korean company’s year-over-year earnings increase is unlikely to have come from its smartphone unit. The conglomerate admitted the coronavirus outbreak hurt its handsets sales, even though it launched two new flagship handsets this quarter.

Samsung’s Second-Quarter Outlook

Provided that it can keep its supply chain on track, Samsung’s revenue surge should continue into the second quarter.

Recently, the White House extended its social distancing recommendations through the end of April. As such, homebound workers and students will continue to use videoconferencing and media streaming applications at unprecedented levels, which will tax the capacity of data center and cloud service providers. That development will likely translate into consistent sales for Samsung in the April through June quarter.

In addition, the conglomerate’s offerings are predicted to increase in value. TrendForce estimates DRAM prices will rise by 20 percent in the current period, while enterprise SSD modules will jump by 15 percent in the same time frame.

The only problem is that lockdown orders in Vietnam have negatively impacted Samsung’s production capacity. If the company is not able to produce enough components to meet demand, its most profitable segment could take a significant hit.

Nevertheless, Samsung’s preliminary first-quarter earnings report reaffirms a recent trend in the technology sector; semiconductor companies with thoughtful leadership showing resilience in the face of the coronavirus crisis.

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