Memory chip sales unlikely to cushion Samsung's virus-hit first quarter profit

The South Korean tech giant is the world’s largest memory chip maker, and its Galaxy smartphones are a major rival of Apple Inc’s products.

Samsung, which also makes home appliances and displays, on Tuesday releases guidance for the January-March quarter profit which is widely expected to be unchanged, and come under pressure in the next few quarters as the impact of coronavirus-related factory and retail stores shutdowns bites.

“The visibility for Samsung’s earnings is low for the second quarter,” said Lee Do-hoon, an analyst at CIMB Research.

For the quarter which just ended, Samsung is likely to estimate its operating profit at 6.2 trillion won ($5.05 billion), unchanged from the same period a year ago, according to Refinitiv SmartEstimate, weighted towards more consistently accurate analysts.

However, the company already warned last month that the pandemic would hurt sales of smartphones and consumer electronics goods this year, and analysts said a prolonged virus outbreak could put higher demand for memory chips at risk.

“If COVID-19 continues into 2H20, the memory market outlook could change for the worse,” CW Chung, head of research at Nomura in Korea, said in a recent report.

When the outbreak first started in China last year, Samsung’s strategy of spreading out its production base to countries including Vietnam and India seemed to pay off: rivals such as Apple were hit by supply disruptions as China shut down factories and locked down cities to control the coronavirus.

Apple rescinded its profit forecast earlier this year due to production halts and retail store shutdowns in China.

Read here