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Samsung Electronics Rides Pandemic-Driven Chip Demand to Report Quarterly Profit Spikes

Samsung Electronics, the world’s largest maker of smartphones and memory chips, announced that it increased its net profit for the fourth quarter by more than a quarter on Thursday, as working from home due to the Coronavirus increased demand for devices that work. with their chips.

But the numbers were below market expectations according to Bloomberg News, with the company warning of continued uncertainty about the pandemic and falling earnings in the first quarter of 2021 due to lower prices.

Samsung Electronics is the main subsidiary of the giant Samsung Group, by far the largest family empire known as the chaebols that dominate business in South Korea, which is ranked 12th in the world economy.

The agglomeration is crucial to the economic health of the South: its total turnover is equivalent to one-fifth of its national GDP.

Samsung Electronics said that profits rose 26.4 percent in the October-December period compared to the previous year to 6.61 trillion won (approximately Rs 43.3 billion), led by the display and memory chip business. .

The company said in its earnings report: “Despite the continuing challenges of the COVID-19 pandemic, efforts made at the company level to ensure a stable supply of products and services around the world helped achieve the results of the Samsung’s fourth quarter “.

The Coronavirus has wreaked havoc in the global economy, with roadblocks and travel bans imposed around the world for months.

But the pandemic, which has killed more than 2 million people worldwide, has also sparked a boom for many tech companies, including Samsung.

“It is true that Samsung’s sales have increased year after year due to the spread of the so-called ‘new normal’, causing an increase in demand for electronic products,” said Jane Park, analyst at Counterpoint Research.

Operating profit increased by 26.4 percent to 9.05 billion Korean won (approximately 59.3 billion rupees), while sales also increased by 2.8 percent to 61.55 billion Korean won (approximately 4,03.170 million rupees).

However, Samsung notes that profits are down from the previous quarter due to lower memory prices and slowdown in consumer product sales, as well as higher marketing costs and the appreciation of the Korean won.

He said that this trend is likely to continue with the profitability in the memory industry affected by the strong won “and the costs associated with new production lines, despite strong demand for mobile phone products and media centers. Data.”

He predicted a recovery in overall global demand in 2021, but warned of “continuing doubts about the possibility of a repeat of the Covid-19 waves.”

For the whole year, net profit increased 21.5 percent to 26.41 billion Korean won (about 1.73 billion rupees), on sales of 236.81 billion Korean won (about 15.51.630 million rupees), an increase of 2.8 percent.

Shares of Samsung Electronics were down 1.64 percent in early trade on Thursday.

Jailed boss

The global chip-making industry is expected to see record revenue this year as the stay-at-home economy continues due to the pandemic, according to TrendForce’s Taipei market tracking.

Samsung has aggressively increased its investment in semiconductors in recent years.

As its latest investment, the tech giant is considering spending up to $ 17 billion (roughly Rs. 1,24260 crore) to build a chip plant in Arizona, Texas or New York, the Wall Street Journal reported last week.

If confirmed, this would be Samsung’s biggest investment in the absence of its de facto leader, Lee Jae-yong.

Last week, Lee was sentenced to two and a half years in prison at his retrial for a widespread corruption scandal that toppled former President Park Geun-hee.

The ruling created further uncertainty about Samsung after the funeral of its late boss Lee Kun-hee, who made Samsung Electronics a global powerhouse in October.

Experts say the leadership vacuum may hamper the company’s decision-making about future large-scale investments, which have been key to its rise.

“Samsung is a very important company for South Korea, and its leader is inconvenient to be jailed,” said Kim Dae-jung, a business professor at Sejong University.

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