Samsung Electronics reported a strong increase in third-quarter results, led by a 50 percent sequential increase in mobile phone sales. While demand recovered in Q3 from the Covid-19 effects earlier in the year, Samsung said it expects profit to fall in Q4, amid weakening memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics.
Total sales in Q3 rose 8 percent year-on-year to KRW 66.96 trillion, and operating profit jumped 59 percent to KRW 12.35 trillion. Net profit rose to KRW 9.36 trillion from KRW 6.29 trillion a year earlier. The strong results were due to a recovery in the mobile phone market, which also stimulated demand for Samsung's chips and displays.
The mobile business grew sales 6 percent year-on-year and 51 percent versus Q2 to KRW 29.81 trillion in Q3, and operating profit at the wider IT & communications division jumped to KRW 4.45 trillion from KRW 2.92 trillion a year ago. Samsung said smartphone sales grew significantly compared to Q2 due to flagship launches such as the Note20 and Z Fold2, and a recovery in demand for mass-market models. Sales of tablets and wearables also increased, and operating profit was supported by structural improvements in component standardization and marketing efficiency.
The impact of new models is expected to be less pronounced in Q4, while the company also faces increased competition after the launch of the new iPhones and higher marketing costs during the holiday season. This is expected to lead to weaker mobile sales on a sequential basis. Over the longer term, Samsung said it plans in 2021 to focus on the 5G and foldable markets, targeting a wider audience for both types of phone.
The Semiconductor division was the biggest contributor to Samsung's operating profit in Q3, with a result of KRW 5.54 trillion versus KRW 3.05 trillion a year ago. Healthy demand for mobile and PC memory helped offset lower memory prices, while the System LSI Business also profited from rising demand for mobile phone components, and the Foundry Business was supported by increased orders for high-performance computing chips and other applications.
Soft prices in server memory due to customer inventory adjustments is expected to weigh on the memory business in Q4, despite stable demand for mobile and laptop memory, Samsung said. The System LSI Business will begin supplying 5-nm 5G SoCs in earnest, and the Foundry Business expects increased demand for HPC chips and mobile SoCs. In displays, mobile panel sales are set to rise significantly from the third quarter.
Samsung expects a stronger first half of 2021, as new CPUs drive server demand and the 5G market continues to grow. Overall, the company expects a recovery in global demand next year, but uncertainties will remain over the possibility of recurring epidemic waves of Covid-19.
