Samsung Electronics reported an unexpectedly high profit in the second quarter, as extensive cost-cutting measures partnered with robust demand for memory chips and electronic appliances kept the company firmly in the green despite the pandemic-stricken economy.
Cost reductions in marketing and production contributed to improving the tech giant's profit margin at 15.4 percent between April and June despite a decline in sales.
Samsung Electronics posted an 8.15 trillion won ($6.8 billion) operating profit in the second quarter, up 23.48 percent over a year ago.
Sales, however, dropped 5.6 percent to 52.97 trillion won compared to the same quarter last year.
The semiconductor business led the growth in profitability as the sector brought in 5.43 trillion won, up 31.8 percent over a year ago.
Dynamic random-access memory (DRAM) chips for servers and NAND flash chips for solid state drives (SSD) were behind the upbeat result.
"The Memory Business saw robust demand for cloud applications related to remote working and online education as the impact from Covid-19 continued, while demand for mobile was relatively weak," Samsung Electronics said in a statement.
Its contract-based chip making business, also known as foundry, also achieved record-high quarterly and half-yearly sales. Samsung Electronics denied a recent rumor that it will skip 4-nanometer chips and jump directly to 3-nanometer chips for its foundry business.
"It is not true that we are skipping the 4-nanometer process," said Han Seung-hoon, senior vice president of the foundry marketing team, during a conference call on Thursday.
"We've begun mass production of 5-nanometer products and are on track to develop 4-nanometer process technology," Han said.
The display business is hit hard by the coronavirus pandemic since the lower consumer demand for smartphones translated into reduced shipments of small- and mid-sized panels.
The postponement of the 2020 Tokyo Summer Olympics also posed a challenge for the large screen business, although an unexpected turnaround helped the segment record an operating profit of 300 billion won compared with a loss of 560 billion won a year ago.
The unexpected boost came from the tech giant's deal with Apple, in which the latter reportedly reimbursed Samsung for missing the sales target of organic light-emitting diode (OLED) displays that the two companies agreed upon.
The operating profit from the consumer electronics division also rose 35.2 percent to 730 billion won over a year ago as strong sales of premium televisions, air conditioners and refrigerators offset the impact of global supply chain disruptions introduced by Covid-19 lockdowns.
The smartphone division, however, suffered a 16.4 percent decline in profit at 1.95 trillion won, affected by weak demand.
The company sold 57 million smartphones and 7 million tablets in the second quarter. Both Samsung and market analysts expect the new smartphone lineups — the Galaxy Note 20 and Galaxy Fold 2 — to boost profit.
"Samsung Electronics is expected to improve profitability in the smartphone segment with the launch of new premium smartphones as well as budget devices," said Choi Do-yeon, an analyst at Shinhan Financial Investment.
In the meantime, the tech giant poured 9.8 trillion won into facility investment in the second quarter.
BY PARK EUN-JEE [[email protected]]
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