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Samsung expects to report a hike of 58% in third quarter operating profits

Samsung expects to report a hike of 58% in third quarter operating profits
On Thursday, Samsung released its earnings guidance for the third quarter of 2020. For the three months from July through September, sales are expected to hit 66 trillion Korean won ($57.6 billion USD) with operating income of 12.3 trillion Korean won ($10.6 billion USD). That easily tops analysts' expectations of 10 trillion won. Later this month, Samsung will report net income and will also restate the figures based on different product categories. If the numbers hold up when released at the end of October, operating income would be up 58% from the same quarter last year.

Samsung was overtaken by Huawei during the second quarter to become the world's top smartphone manufacturer. But with the Chinese manufacturer expected to soon lose access to cutting-edge 5nm chips manufactured by TSMC, Samsung should return to the top of the charts. A new U.S. export rule announced in May prevents foundries that use U.S. technology to produce chips from shipping to Huawei without obtaining a license from the U.S. The rule change took effect on September 15th and could have a major impact on the number of Mate 40 handsets Huawei produces this year. The phone is expected to be the company's most technologically advanced of 2020.

Not only is Samsung benefiting from Huawei's issues with the U.S., it also is seeing business improve in India where demand for Chinese phones are sliding due to geopolitical problems between China and India. And Sammy's memory business received a boost from purchases made by Huawei to stock up on memory chips from March through September tightening global inventories of the component. MS Hwang, an analyst at Samsung Securities, said, "Huawei’s purchases are offsetting weakness in server-use demand and are devouring market inventory, which should affect prices down the road." Lee Su-bin of Daishin Securities sees further problems ahead for Huawei next year and believes that Samsung can capitalize on them. "We see its margins moving higher in 2021 as Huawei continues to struggle," said Lee who added that Samsung will benefit from the quick rollout of 5G and the Korean firm's new focus on foldable phones. For the current quarter, he says that Samsung will ship 80.6 million smartphones this quarter, up 49% sequentially.

Samsung's shares rose as much as 1.3% in Seoul on Thursday.

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