Samsung Forecasts Solid Q1 Profits As Working From Home Boosts Data Center Chip Demand

With some 80% of the global economy under some form of shelter-in-place orders, a surge in working from home activity has boosted demand for data center chips and supported Samsung's Q1 earnings.
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Samsung Electronics  (SSNLF)  forecast solid first quarter profits Tuesday, thanks in part to surge in data center chip demand triggered by a wave of working-from-home activity amid coronavirus lockdowns in markets around the world. 

Samsung, the world's biggest chipmaker, said it sees operating profits for the three months ending in March coming in at 6.4 trillion Korean won ($5.2 billion), a figure that is up 3.2% from the same period last year and largely ahead of the Street consensus forecast. Group revenues, Samsung said, are likely to rise 5% from last year at 55 trillion Korean won.

Samsung will publish detailed first quarter earnings figures late this month, but recently warned investors that smartphone and consumer electronics sales would be hardest-hit from the coronavirus pandemic, which swept through Asia before migrating to Europe and the United States, but noted that data center demand would cushion some of that impact. 

Samsung shares ended the Tuesday session in Seoul 1.85% higher at 49,600 Korean won each, a move that trims the stock's three-month gain to around 11.1%.

"For memory, in addition to strong datacentre demand led by hyperscalers, additional demand for cloud service from working-from-home and online purchase drove higher DRAM shipment growth (-3% QoQ) and average selling prices hike (4% QoQ) in 1Q20," said Daiwa analyst SK Kim.

"Due to expanding COVID-19 shutdown in the US/Europe, we assume a negative impact on its smartphone/TV shipment from mid-March," he added. "For mobile, while we believe lower smartphone shipments (-14% QoQ) resulted in lower revenue, we assume cost savings from market expenses positively impacted its operating profit in 1Q20."