Business & Economy

Pandemic memory chip demand increases Samsung profits by 21.5%

Seoul, Jan 28 (efe-epa).- The high demand for memory chips and displays as a result of lockdowns caused by the Covid-19 pandemic increased the net profit of Samsung Electronics by 21.48 percent in 2020, the South Korean technology giant reported on Thursday.

The Suwon-based company earned 26.4 trillion won (nearly $23.6 billion) over the year compared to the 21.74 trillion won of 2019.

Its operating profit increased by 29.6 percent to 35.99 trillion won and its turnover increased by 2.78 percent to 236.81 trillion won.

Its main business branch, that of semiconductors, benefited thanks to the increase in demand after a significant part of the globe had to stay at home, thus promoting teleworking and the remote services sector.

In turn, its branch of consumer electronics and telecommunications were favored over July-September by a sharp recovery in demand once lockdowns ended.

In the fourth quarter of the year, and despite the cheaper dollar, the company achieved a net profit of 6.6 trillion won, an increase of 26.4 percent year-on-year, given the persistent strength in chip demand.

Operating profit jumped 26.39 percent to 9.05 trillion won in the last quarter, supported by sales revenue of 61.55 trillion won, a 2.78 percent increase.

The figures, in line with the forecasts the South Korean company published earlier this month, nevertheless indicate a setback compared to third-quarter results.

This cut in profits was attributed, among other reasons, to an increase in marketing costs and sluggish sales of consumer electronics products apparently affected by the worsening of the pandemic in Europe in the last two months of the year, Samsung said in a statement.

Above all, the top South Korean conglomerate was affected by the strengthening of the won against the dollar, the euro and other key currencies.

This has resulted in “a negative impact equivalent to about KRW 1.4 trillion compared with the previous quarter, mostly in semiconductor and display businesses,” the company said.

“Despite solid demand from mobile products and data centers,” the company expects a weakening of its chip business in this first 2021 quarter due to the strength of the South Korean currency and costs derived from its new production lines.

Samsung highlighted that “uncertainties remain such as geopolitical risks and a weaker dollar,” in reference to the doubts that the pandemic continues to raise, and the pace of recovery linked to the vaccination campaigns.

Added to this is the fact that the de facto leader of Samsung, Lee Jae-yong, returned to prison on Jan. 18 over the corruption plot that overthrew former South Korean president Park Geun-hye in 2017.

Lee, who is also being tried in another case for alleged accounting fraud and stock manipulation during the controversial merger of two Samsung group companies in 2015 that sought to cement his leadership over the conglomerate, could be in prison until July 2022.

This, analysts believe, could negatively influence Samsung’s long-term strategic investment plans, especially now that visits to South Korean prisons are highly restricted due to Covid-19.

Samsung also announced the creation of a Shareholder Return Program for 2021-2023 that will allocate at least 9.8 trillion won annually to dividend packages.

According to experts, these decisions respond to the need to satisfy shareholders after Lee’s court scandals during the process to inherit control of the group from his father, former Samsung Group chairman Lee Kun-hee, who died last year. EFE-EPA


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