Samsung Electronics Co.
announced Thursday a 26% increase in its net income for the fourth quarter, as the world’s largest maker of smartphones and memory chips continued to benefit from strong demand for its products amid a coronavirus pandemic.
But the South Korean technology giant faces additional challenges in the new year. Besides the pandemic, the company is struggling with its de facto CEO.
behind bars. And its competitors in phones and semiconductors are consolidating and expanding.
Samsung posted a loss in the year ended December 31. Net profit for the December quarter was 6.61 trillion South Korean won, or nearly $6 billion, compared with 5.23 trillion won a year earlier. Revenue rose to 61.55 trillion won from 59.88 trillion won in the previous year.
Analysts forecast net income of 6.74 trillion won and revenue of 61.21 trillion won, according to estimates by S&P Global Market Intelligence.
Samsungvice president Lee Jae-young, pictured here on Jan. 18, returns to prison after being accused again of bribing a former South Korean president.
Lee Jin-man/Presse Associée
Like other technology companies, Samsung performed well thanks to strong demand for most consumer electronics and displays, although economic pressures drove down smartphone sales in the first half of last year. The company is closely followed in the world of technology as a leading manufacturer of measurement and computer equipment and as a major supplier to other electronics companies.
The company warned of a decline in revenue in the first quarter of 2021, but reported expected growth in the first half of the new year.
Samsung phones have largely recovered from the bumps caused by store closures due to the pandemic early last year. Just two weeks ago, the company launched its latest flagship phone, the Galaxy S21, downgraded significantly from previous years in an effort to capture market share from Huawei Technologies Co. now that the Chinese company has been cut off from chip supply due to U.S. sanctions.
But Samsung’s announcement, which extends the sales window for the company’s latest offerings by more than a month, is the most aggressive in years and is a sign of the pressure the pandemic continues to put on smartphone recovery, said Wayne Lam, senior director of research at market analyst CCS Insight. On Thursday, the company announced that mobile phone sales in the fourth quarter fell 11 percent from the previous year to 21.46 trillion won.
They can look back in history – they just added value and contributed to the overall cost of the phone, Lam said. Now they cut their own hair.
The smartphone market could also tilt in favor of Samsung or other competitors if LG Electronics Co. sells its smartphone division, which has been eating up money for nearly six years. Seoul-based LG remains a major competitor in the U.S. market, though it lags behind Samsung and Apple Inc. LG’s CEO told employees this month that this leaves all possibilities open for the future.
Samsung’s storage division saw prices fall in the fourth quarter, and executives said the cost of new lines has also dampened the impact of demand for cloud servers and data centers. But memory prices are expected to rise again in the first half of 2021, according to industry analysts, especially in light of the global chip shortage and growing demand from sectors such as automotive and the 5G smartphone industry.
The company is also considering long-term investments in chip development as competition has grown stronger in recent months. He was looking for places in Arizona, Texas or New York where he could invest up to $17 billion, the Wall Street Journal reported last week.
Management said Thursday that no decision has been made on a new plant in the United States, but said the company could pursue a major merger or acquisition in the next three years.
Key positions at Samsung are in turmoil following the return to prison of Mr Lee, Samsung’s official vice president, following a fresh corruption trial against the former South Korean president. Lee and his lawyers refused to appeal the verdict on Monday, which means he will spend an additional year and a half in prison after serving his earlier sentence.
In an internal memo released Tuesday by Samsung’s three CEOs, Lee apologized for raising concerns and called on employees to continue working toward investment, job creation and meeting Samsung’s social obligations.
The company also said Thursday that it will continue to return 50 percent of free cash flow to shareholders and increase dividend payments nominally to 9.8 trillion won a year from 9.6 trillion won in 2023.
Email Elizabeth Ko at [email protected].
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