Samsung's second-quarter chip sales unlikely made up for smartphone weakness

At Samsung, demand for its chips from data centers bulking up to meet a surge in work-from-home traffic was not likely enough to offset muted sales of its smartphones in the second quarter, said, analysts.

The world’s biggest supplier of DRAM and NAND memory chips on Tuesday will announce preliminary April-June revenue as well as operating profit, which it previously expected to show a decline.

Profit likely fell 4.5% to $5.25 billion from the same period year earlier, according to Refinitiv SmartEstimate, which is weighted towards the more consistently accurate analysts.

Work-from-home orders and growth in online learning are underpinning chip demand amid the CovidA-19 pandemic, prompting US DRAM supplier Micron Technology to forecast strong quarterly revenue last month.

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Chips bring in roughly half of Samsung’s profit. The rest is mainly smartphones, of which the South Korean firm is the world’s largest maker.

“With improved demand, a spike in DRAM prices helped Samsung continue with a solid performance in the second quarter,” said analyst Park Sung-soon at Cape Investment & Securities.

Those price increases were likely driven by data centers stockpiling chips and so are unlikely to continue, analysts said. Though DRAM prices jumped 14% in the quarter, they were flat in June versus May, showed data from DRAMeXchange.

“Until uncertainty stemming from the pandemic goes away, the sector’s outlook isn’t too positive,” said CW Chung, Nomura head of research in Korea.

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In smartphones, Hyundai Motor Securities estimated Samsung’s operating profit fell 16% in April-June.

Gadget sales have fallen along with discretionary spending during the pandemic. Samsung’s smartphone shipments hit a low in April and are likely to take time to recover, analysts said.

Samsung’s display business - whose customers include Apple and Huawei is likely to post a second consecutive quarter of loss, said, analysts.

The firm will likely release detailed earnings figures later this month.