Samsung sees pickup in chip demand from new phones, second-quarter profit jumps

© Reuters. FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – Samsung Electronics (LON:) Co Ltd (KS:) said on Thursday it expects a further pick-up in chip demand in the second half of the year, driven by new smartphone launches, but warned the coronavirus pandemic and trade disputes pose risks.

Samsung, the world’s top maker of memory chips and smartphones, posted a 23% jump in operating profit in the April-June quarter on the back of strong DRAM chip sales.

The second quarter sales spike was largely due to a jump in the number of people working and learning online from home because of the pandemic.

Fellow Korean company SK Hynix (KS:) and U.S. firm Micron Technology Inc (O:) have also flagged increased demand from this trend for DRAM chips, which provide devices with temporary workspaces and allow them to multi-task.

Samsung said it expects “solid server demand” to continue in the second half, but it would closely monitor customer inventory and investment plans.

That outlook is more positive than SK Hynix and many analysts, who believe DRAM prices will fall in the second half after the stockpiling in the first half.

“I expect DRAM prices to fall in the second half because server customers need time to reduce inventories they have built because of supply chain concerns,” said Park Sung-soon, analyst at Cape Investment & Securities.

Samsung’s chip business saw operating profit jump 60% to 5.43 trillion won in the second quarter, accounting for two-thirds of its total profit.

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Operating profit in the mobile division rose 25% to 1.95 trillion won despite weaker smartphone shipments, helped by lower marketing expenses and offline promotions amid the COVID-19 outbreak.

Samsung said it plans to unveil new flagship smartphones including the Galaxy Note and a foldable phone in the second half, while seeking to expand sales of mid-tier models.

The company’s shares rose 1.2% in morning trade on Thursday, ahead of a 0.3% gain in the wider market (), extending gains in previous days.

Samsung said a one-off gain at its display business helped boost its profit, without elaborating further. Samsung’s display business counts Apple Inc (O:) as a customer.

Operating profit rose 8.1 trillion won (5.25 billion pounds), from 6.6 trillion won a year earlier, in line with the company’s estimate earlier this month.

Revenue dropped 6% to 53 trillion won. Net profit rose 7% to 5.6 trillion won.

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