Samsung reports solid Q4 profit

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South Korean electronics giant Samsung has reported financial results for the fourth quarter and the fiscal year 2020.

The company posted KRW 61.55 trillion (€45.4bn) in consolidated revenue and KRW 9.05 trillion in operating profit in the quarter ended December 31st 2020. For the entire year, it reported KRW 236.81 trillion in revenue and KRW 35.99 trillion in operating profit.

Although challenges from the Covid-19 pandemic continue, company-wide efforts to ensure a stable supply of products and services globally helped Samsung’s Q4 results. Profit rose 26.4 per cent year-on-year led by display and memory chip businesses, but fell 26.7 per cent from the third quarter due to weaker memory prices and sluggish consumer products sales, as well as higher marketing costs and negative impact from the Korean won’s appreciation.

The local currency’s value rose sharply against the US dollar, Euro and key emerging market currencies, resulting in a negative impact equivalent to about KRW 1.4 trillion compared with the previous quarter, mostly in semiconductor and display businesses.

The Memory Business saw earnings decline quarter-on-quarter despite solid shipments, weighed down by a continued decline in chip prices, the won’s strength and initial costs from new production lines. The System LSI and the Foundry Business also took a hit from the stronger won, even though orders from major global customers increased. Profit from the Display Panel Business grew significantly both QoQ and YoY, thanks to a sharp rise in mobile display production and improved demand in the large panel market.

The Mobile Communications Business posted a QoQ decline in profit due to weaker sales and higher marketing spending. However, the results were in line with its earnings a year earlier, supported by continued efforts to optimize costs. The Networks Business saw improved earnings on the back of 5G service expansion in Korea and continuing 4G/5G rollouts globally.

The Consumer Electronics Division reported a quarterly fall in profit, as increased costs outweighed stronger year-end sales in developed markets.

Looking ahead, Samsung Electronics expects overall profit to weaken in the first quarter of 2021. The Memory Business will likely continue to be affected by the ongoing strength in the won and costs associated with new production lines, despite solid demand from mobile products and data centres.

The System LSI Business plans to expand shipments of system-on-chips (SoCs), image sensors and display driver ICs (DDIs), while the Foundry Business is set to increase 5-nm SoC and 8-nm high-performance computing (HPC) chip production. In displays, mobile display sales are expected to drop considerably after a strong performance in the fourth quarter.

The Mobile Communications Business is set to see robust sales of flagship smartphones such as the Galaxy S21 and new mass market models. The Consumer Electronics Division will likely post stable results despite weakness in seasonal demand, underpinned by new product launches and introduction of new premium line-ups.

 

For 2021, the Company expects a recovery in overall global demand but uncertainties persist over the possibility of recurring COVID-19 waves.

 

The Memory Business, specifically the DRAM market, is expected to see a recovery during the first half thanks to strong demand from mobile and server applications, but geopolitical and economic uncertainties will likely continue. The Company will accelerate migration to 1z-nm DRAM and 6th-generation V-NAND to enhance cost competitiveness and technology leadership. The System LSI Business will actively respond to demand for 5G SoCs and high-resolution sensors with differentiated products. The Foundry Business also aims to expand mass production based on the 5-nm extreme ultraviolet lithography (EUV) process and diversify application areas.

 

The Display Panel Business will further enhance its leadership in mobile displays while focusing on timely development of new quantum-dot (QD) display products in large-sized panels.

 

The Mobile Communications Business plans to increase sales of flagship, foldable and new mass market 5G models while continuing efforts to improve costs. The Consumer Electronics Division aims to expand its premium lineup including Neo QLED, Micro LED TVs and Bespoke appliances.

 

Samsung’s capital expenditures in 2020 reached a total of KRW 38.5 trillion, including KRW 32.9 trillion spent on semiconductors and KRW 3.9 trillion on displays. Spending on memory semiconductors grew significantly for capacity expansion and introduction of advanced process technology, while investment in the Foundry Business also jumped on expansion of 5-nm EUV facility. The Company also increased investment for QD displays and new mobile screen technologies.


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