Korea’s two IT giants Samsung Electronics and LG Electronics could fare better than expected in the second quarter as demand for their appliances and smart gadgets in the Korean and other advanced markets are recovering this month, analysts said.
They said the virus pandemic has certainly impacted negatively on the demand for products of Samsung and LG in the global market, especially in April when countries implemented strict lockdown measures to keep their populations at home, but they could minimize the loss as retailers resumed their sales activities in June.
Both companies are set to announce their estimated second-quarter earnings reports in the first week of July, and analysts added they would likely beat the market consensus, adding Samsung will benefit from recovered demand for its TVs and smartphones and LG will be buoyed by demand for its high-priced appliances.
Samsung Electronics, the world’s largest memory chip and smartphone maker, is expected to post an operating profit of mid-6 trillion won, better than the previous market consensus of around $5.09 billion with help from robust chip sales and recovering demand for phones.
Lee Seung-woo, an analyst at Eugene Securities, said Samsung could post estimate-beating earnings reports in the second quarter thanks to soaring memory chip sales. Despite the virus pandemic, Samsung’s chip business has remained upbeat thanks to demand from servers for data centers.
According to market tracker TrendForce, shipments of servers are expected to be increased by 9 percent in the second quarter compared with the previous quarter. DRAMeXchange data also showed the contract price for 8-gigabit DDR4 DRAM also rose to $3.31 in May from $2.84 in January.
“Samsung sold 16.9 million smartphones in the global market in May, up 47 percent from the previous month. This could be possible as closed smartphone factories started to resume their operations and Samsung could supply more budget smartphones such as the Galaxy A series. Samsung’s smartphone sales will be improved in June,” said Noh Kyung-tak, an analyst at Eugene Securities.
The analyst added Samsung’s upbeat smartphone sales will be continued in the following months as its Chinese rival Huawei Technologies is struggling with a series of uncertainties such as the U.S. government’s prolonged sanctions on the company and boycott Chinese goods movement in India due to the border dispute between the two.
LG Electronics was also expected to suffer a heavy blow in the second quarter, but the company is likely to minimize the impact thanks to recovering demand for its products in the Korean market and increased online sales in the advanced countries.
The market consensus expects the company will post an operating profit of around 400 billion won in the April-June period, about between 30 percent and 40 percent decrease from the same period in 2019, which was at $544 million.