Visitors look at TV monitors produced by South Korean electronics colossus, Samsung Electronics. Photo: AFP

South Korean tech giant Samsung Electronics flagged a jump of more than 25% in Q4 operating profit Friday, with working from home under the coronavirus pandemic driving demand for the devices powered by its chips.

The world’s biggest manufacturer of smartphones and memory chips said in an earnings estimate that it expected an operating profit of 9 trillion won (US$8.23 billion) for October to December, up from 7.16 trillion won a year earlier.

The prediction was slightly short of analyst forecasts of 9.34 trillion won compiled by market researcher FnGuide.

The figures come about two months after the burial of late chairman Lee Kun-hee – who turned Samsung Electronics into a global powerhouse – and as the coronavirus wreaks havoc with the world economy.

But the pandemic has also seen many tech companies boom, while South Korea saw a return to quarter-on-quarter growth in Q3 last year, driven by a better-than-expected export performance.

But Samsung’s operating profit and 61-trillion-won sales forecast were both lower than its third-quarter figures, when its mobile and chip businesses were boosted by US sanctions against Huawei.

Analysts say a stronger won and rival Apple’s October launch of its flagship iPhone 12 were among the factors behind the quarter-on-quarter decline in profits.

“Samsung’s midrange and value smartphones account for about 80% of its mobile sales,” said Jusy Hong, a director at market researcher Omdia.

“But Chinese firms – such as Xiomi, Vivo and Oppo – have been also expanding their share in the midrange phone market, in regions including India and Southeast Asia.”

Samsung Electronics is crucial to South Korea’s economic health.  

It is the flagship subsidiary of the giant Samsung group, by far the largest of the family-controlled conglomerates known as chaebol that dominate business in the world’s 12th-largest economy.

Its overall turnover is equivalent to a fifth of the national gross domestic product.

Leader’s retrial

The firm’s shares were up 1.33% in morning trade Friday.

Looking forward, analysts said its outlook for 2021 was fairly stable, driven by continued demand for memory and growth in the consumer electronics and chip-manufacturing businesses.

They also expected Samsung’s mobile business to improve, with the firm unveiling its latest lineup of flagship Galaxy flagship phones next week.

Meanwhile, the global chip-manufacturing industry is expected to see record revenue this year, with the stay-at-home economy persisting due to the pandemic, according to Taipei-based market tracker TrendForce.

“2021 will be a year for the growth of Samsung foundry (chip-manufacturing) business,” said Sujeong Lim, an analyst at market observer Counterpoint.

“Demand for semiconductors such as 5G, IoT (Internet of Things), and high-performance smartphones is exploding.”

But the firm’s de facto leader Lee Jae-yong, the late chairman’s son, is awaiting the verdict in his retrial over a sprawling corruption scandal, which could see him return to prison.

The ruling is due later this month and a conviction could deprive the firm of its top decision-maker after prosecutors requested a nine-year jail term.  

AFP