Samsung Electronics' Q2 operating profit rises 23.5% on-year on chips, one-off gain on display

“Despite slow demands and closure of key production sites (amid COVID-19 headwinds), we were able to enforce a wide range of timely and effective measures through our differentiated global supply chain to ensure our customers have a reliable access to our services,” said Seo Byung-hoon, head of investor relations during the conference call that followed the quarterly report.

Samsung cited lackluster consumer sentiments for smartphones and other devices as what caused the slight revenue fall, and credited strong demand for memory chips, seasonal home appliance sales and a one-off gain on display business as what towed the better-than-expected second quarter performance. The company had also cut costs on marketing for more efficient budget execution.

Samsung said that more cases of working from home and studying from home during the COVID-19 pandemic had led to higher demand for memory chips, data centers and personalized computers.

The overall demand for display panels decreased -- in the small display segment, closure of retails shops amid the pandemic led to dampened sales of smartphones, and in the large display segment, reduced global sports event such as the Tokyo Olympics and the Euro 2020 led to a decrease in TV sales. A growth in monitor sales and a one-off gain alleviated the loss by a margin.

Lower demand for mobile memory resulted in weaker NAND bit growth compared to the market. This was also fueled by an inability to fulfil demand in some application areas, Samsung said. System LSI also reported lower earnings amid weakened mobile market.

The company said it expects a gradual recovery in the later half of 2020, on the back of a rebound in consumer demands for new, innovative flagship smartphone models of Galaxy Note and Fold, and other consumer electronics, such as game consoles. Samsung Electronics is holding its annual Unpack event on August 5 via online channels, where it will introduce bolstered models of its high-end smartphones.

Harman’s operating loss continued due to unfavorable environment in the global automotive industry but Samsung said it expects a turnaround as consumer audio sales grow.

Samsung’s consumer electronics business will seek for earnings growth by focusing on premium product lines such as the quantum-dot light-emitting diode products and seasonal home appliance sales.

Samsung’s financial statement is a consolidated information of the performance of its consumer electronics (CE), information technology and mobile communications (IM), device solutions (DS) and display panel (DP) businesses.

The report contains Samsung’s internal transactions between aforementioned business segments.

Since 2020, the CE segment includes the performance of Samsung’s medical device business.

Harman’s revenue and operating profit is recorded according to Samsung Electronics’ fiscal year and reflects the acquisition costs.

Samsung Electronics made a facility expansion investment in the second quarter amounting to 9.8 trillion won. Broken down, 8.6 trillion won was used for semiconductor business and 800 billion won for display. The accumulated internal investment the company has made in the first half of 2020 reaches 17.1 trillion won, which is 6.4 trillion won more than the same period a year before.

“Samsung Electronics will continue to invest in key business areas such as semiconductors, display and smartphones, as well as in emerging areas such as artificial intelligence, 5G, software and automotive applications,” said Seo, the IR head.