Samsung’ Quarterly Profit had A Record Surge Due to Rise of Huawei Chip Demands

A leading South Korean tech company, Samsung Electronics Co Ltd. or Samsung released a limited report of its quarterly performance on Thursday, October 8, 2020, and noted a record surge of profit in the third quarter (Q3) mainly due to Huawei’s rising demand for chips supply. The report stated that the company’s Q3 profit had soared nearly 58%, which was its highest quarterly-gained in two years, beating the analysts’ estimations.

Chinese tech giant, Huawei Technologies Co Ltd. (Huawei) was facing challenges since the United States (US) imposed a ban to supply chips to Huawei from American companies and other chips-manufacturing companies using American technologies. Washington moved against Huawei as the company was suspected of helping espionage of the Chinese government.

Since the move has come into effect from mid-September, the Chinese firm was looking for chips suppliers to fill the vacuum and hurriedly relied on Samsung. In addition, Samsung’s home appliance business was seen growing significantly during the pandemic lockdowns since consumers spent more on electronic appliances such as air purifiers.

Samsung’s Impressive Quarterly Profit

In the Q3 report, Samsung stated it earned an operating profit of about 12.3 trillion won ($10.6 billion) for the three months ended September, which exceeded an estimation of 10.5 trillion won made by a Refinitiv SmartEstimate. This was Samsung’s highest profit earned in its quarterly performance since it made 17.57 trillion won in the Q3 of 2018 and the revenue of the current fiscal year rose about 6% as compared to 66 trillion won a year earlier.

A head analyst of research at Nomura in Korea, CW Chung explained, “It seems Huawei’s impact on Samsung’s chip business was bigger than the market expected, and there was a big surprise in the smartphone and home appliance businesses.” The South Korean tech giant earned its big fortune as the US began its aggressive move against Huawei, which has turned the Chinese company to rely on its chips dependency on Samsung.

Nevertheless, analysts expressed doubts about whether the company’s profit trend would continue in the Q4 since memory chip prices are highly affected by the coronavirus pandemic. Besides that, the possibility of launching a new Apple’s iPhone models in the international market in the coming months was also another main concern that could impact Samsung’s revenue.

Growing Sales of Samsung’s Phones

Samsung’s rise in smartphones sale was boosted by the sharp decline in the purchase of Huawei’s phones outside China, which has seen adverse impacts on Huawei’s demand in Europe and other regions. Tom Kang, an analyst at Counterpoint said, “Many consumers were reluctant to buy Huawei phones because they thought that Huawei may discontinue phone sales and services because of U.S. restrictions,” adding that Samsung has boosted sales of mid- and low-end phones.

Analysts explained that Samsung started slowly replacing the markets controlled by Chinese companies including Xiaomi, Oppo, and Vivo; and as a result, the former company was expected to post its biggest smartphone profit in at least four years.

Meanwhile, Samsung witnessed a sharp rise in its smartphone revenue due to growing anti-Chinese sentiments in India following a border clash in June. The move of the Indian government has widely affected Chinese smartphone manufacturers including Huawei, Xiaomi, and other competitors.