Solid chip gross sales not going to cushion Samsung’s virus-hit first quarter income

Inventory Markets3 hours prior to now (Apr 05, 2020 07: 40PM ET)

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© Reuters. FILE PHOTO: Closed notices are displayed at the entrance of Galaxy Harajuku store in Tokyo

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By Hyunjoo Jin

SEOUL (Reuters) – The coronavirus-driven global shift to working from home is position to have boosted query of for Samsung Electronics (KS:)’ memory chips from pc computer makers and recordsdata centres, but first-quarter profits tend to remain flat as the outbreak weakened client electronics gross sales.

The South Korean tech big is the arena’s largest memory chip maker, and its Galaxy smartphones are a predominant rival of Apple Inc (NASDAQ:)’s merchandise.

Samsung, which also makes house house equipment and displays, on Tuesday releases steering for the January-March quarter income which is widely anticipated to be unchanged, and procedure under strain in the following couple of quarters as the affect of coronavirus-associated manufacturing facility and retail stores shutdowns bites.

“The visibility for Samsung’s earnings is low for the 2d quarter,” mentioned Lee Elevate out-hoon, an analyst at CIMB Analysis.

For the quarter which correct ended, Samsung is seemingly to estimate its working income at 6.2 trillion obtained ($5.05 billion), unchanged from the an identical length a year prior to now, in accordance with Refinitiv SmartEstimate, weighted in direction of extra consistently correct analysts.

However, the company already warned ideal month that the pandemic would wound gross sales of smartphones and client electronics items this year, and analysts mentioned a extended virus outbreak would possibly well set aside higher query of for memory chips at threat.

“If COVID-19 continues into 2H20, the memory market outlook would possibly well replace for the extra serious,” CW Chung, head of analysis at Nomura in Korea, mentioned in a contemporary document.

When the outbreak first started in China ideal year, Samsung’s procedure of spreading out its production unsuitable to worldwide locations including Vietnam and India regarded to pay off: competitors similar to Apple had been hit by provide disruptions as China shut down factories and locked down cities to govern the coronavirus.

Apple rescinded its income forecast earlier this year this skill that of production halts and retail store shutdowns in China.

But as the virus spread across the globe, Samsung too has had to shut factories and retail stores in Europe, India and the US, extra unnerving merchants: Samsung Electronics shares have slumped 15% thus far this year, but outperformed the broader market’s 22% fall.

Potentialities for Samsung’s flagship Galaxy S20 top class smartphones, launched bigger than one month prior to now, peer sad. Its 5G-enabled S20 phones are already promoting at a third of their originate effect of $1,308 in South Korea, an official at a local carrier told Reuters.

Brokerage Hanwha Funding & Securities estimates Samsung smartphone gross sales fell 17% in the first quarter from a year earlier. Last year, a dawdle in profits at the smartphone and chip businesses bigger than halved Samsung’s beefy-year earnings.

Its direct enterprise, which counts Apple and China’s Huawei Applied sciences as customers, is seemingly to have swung support to a loss after three consecutive quarterly income this skill that of unhurried query of from its clients, analysts mentioned.

Samsung handiest affords its estimates for its first-quarter income and dealing income on Tuesday, with miniature print seemingly to be released later this month.

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