Samsung expects 5G demand to drive chip sales higher in 2020

Thanks to the coronavirus, most of the world's tech manufacturers are facing a situation that they've never had to deal with before. Navigating a global economy that has been turned upside down because of the disease, Samsung Chief Executive Kim Ki-nam cited the pandemic and the U.S.-China trade dispute for continued weakness in the global smartphone market. While Kim is negative on the outlook for smartphones this year, he is positive about the company's chip business; he expects a rebound in 2020 after weak global demand and the U.S.-China trade war ate into Sammy's chip business last year. The unit accounts for half of the company's operating profit.

According to Reuters, Koh Dong-jin, president of Samsung’s mobile and network business, told the annual general meeting in Seoul that "The global smartphone market was expected to turn to growth this year, but with virus showing signs of being prolonged, the smartphone market is contracting. But 5G smartphone demand is expected to rise." Samsung just released its first-half flagship phones and the early word is that sales of the Galaxy S20 line are well below the pace seen after the release of previous Galaxy S models.

The coronavirus surely has a lot to do with that and while the Space Zoom feature with a 100x hybrid zoom sounds enticing, the $1,400 price tag on the Galaxy S20 Ultra 5G is quite daunting in a world where a small bottle of hand sanitizer now costs over $100-if you can find one. For global consumers with no idea whether they will still have a job a few weeks from now, making the purchase of an expensive new phone seems unnecessary when the mortgage is due and the children need to be fed. 

Still, Samsung's consumer electronics chief Kim Hyun-suk said that it is too early to figure out how COVID-19 will affect the company's consumer business. Kim said, "We had expected the consumer electronics market to rise slightly this year, but with the coronavirus fast-spreading, uncertainties are growing faster than ever, and it is very difficult to predict the future."

But then it comes to chips, Samsung feels positive about 2020, unlike rival chipmakers who have been chipping away at their sales forecast. Samsung sees strong demand for chips used in 5G wireless networks, data centers, and automobiles. While demand for chips will rise, supply will shrink according to Kim as foundries (including Samsung's) move to 5nm chip production instead of increasing capacity. At 5nm, Samsung's chips will carry 127 million transistors per square mm making them more powerful and energy-efficient than current chips made using the 7nm node.

The report helped Samsung's shares rise .6% earlier today against a broader market decline in South Korea of .5%. The number of people attending Samsung's stockholders' meeting dropped from 1,000 last year to 400 this year because of the coronavirus outbreak. Those showing up at the gathering were scanned with a thermal camera and had their temperature taken when they first arrived at the venue. They also were seated two seats away from each other to help prevent attendees from spreading the virus. The company also instituted electronic voting for the meeting and suggested that stockholders vote online.

It has been a busy first quarter for Samsung with the release of the Galaxy Z Flip foldable phone and the launch of the Galaxy S20, Galaxy S20+ and Galaxy S20 Ultra 5G. Later this year, we should see Samsung release the Galaxy Fold 2, and the Galaxy Note 20. Last year Samsung remained the largest smartphone manufacturer in the world followed by Huawei and Apple.