Solid chip sales no longer going to cushion Samsung’s virus-hit first quarter profit

SEOUL (Reuters) – The coronavirus-pushed global shift to working from house is predicament to possess boosted question for Samsung Electronics’ memory chips from computer makers and files centres, however first-quarter earnings are inclined to remain flat because the outbreak weakened user electronics sales.

Workers carrying masks to forestall contracting the coronavirus stay unsleeping for a shareholder of Samsung Electronics Co. old to the company’s annual well-liked assembly in Suwon, South Korea, March 18, 2020. REUTERS/Kim Hong-Ji/Files

The South Korean tech massive is the world’s largest memory chip maker, and its Galaxy smartphones are a foremost rival of Apple Inc’s merchandise.

Samsung, which also makes dwelling dwelling equipment and displays, on Tuesday releases steering for the January-March quarter profit which is broadly expected to be unchanged, and arrive stressed in the next few quarters because the impact of coronavirus-connected manufacturing facility and retail stores shutdowns bites.

“The visibility for Samsung’s earnings is low for the 2nd quarter,” acknowledged Lee Attain-hoon, an analyst at CIMB Be taught.

For the quarter which precise ended, Samsung is seemingly to estimate its working profit at 6.2 trillion received ($5.05 billion), unchanged from the same duration a year ago, based totally on Refinitiv SmartEstimate, weighted in the direction of more constantly precise analysts.

On the different hand, the company already warned last month that the pandemic would damage sales of smartphones and user electronics items this year, and analysts acknowledged a extended virus outbreak might perhaps perhaps presumably save higher question for memory chips at menace. [L4N2BB08I].

“If COVID-19 continues into 2H20, the memory market outlook might perhaps perhaps presumably change for the more serious,” CW Chung, head of learn at Nomura in Korea, acknowledged in a present document.

When the outbreak first started in China last year, Samsung’s strategy of spreading out its production putrid to countries including Vietnam and India regarded as if it might perhaps perhaps perhaps perchance well pay off: opponents similar to Apple were hit by present disruptions as China shut down factories and locked down cities to manipulate the coronavirus.

Apple rescinded its profit forecast earlier this year because of production halts and retail store shutdowns in China.

But because the virus unfold across the globe, Samsung too has had to conclude factories and retail stores in Europe, India and the USA, extra unnerving investors: Samsung Electronics shares possess slumped 15% to this point this year, however outperformed the broader market’s 22% plunge.

Potentialities for Samsung’s flagship Galaxy S20 top rate smartphones, launched a pair of month ago, thought gloomy. Its 5G-enabled S20 phones are already selling at a third of their initiating imprint of $1,308 in South Korea, an unswerving at a native carrier informed Reuters.

Brokerage Hanwha Investment & Securities estimates Samsung smartphone sales fell 17% in the first quarter from a year earlier. Last year, a dart in earnings at the smartphone and chip companies more than halved Samsung’s chunky-year earnings.

Its say change, which counts Apple and China’s Huawei Applied sciences as customers, is seemingly to possess swung again to a loss after three consecutive quarterly profit because of sluggish question from its customers, analysts acknowledged.

Samsung easiest provides its estimates for its first-quarter earnings and working profit on Tuesday, with important aspects seemingly to be launched later this month.

($1 = 1,228.6700 received)

Reporting by Hyunjoo Jin; Editing by Miyoung Kim and Miral Fahmy

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