Samsung Electronics, the largest memory chip manufacturer in the world, is expected to witness its first quarter profits to remain flat, even after a strong chip demand as the COVID-19 pandemic has coerced majority of the global workforce to work from home. Weaker sales of consumer electronics is said to be the reason for the low profit.
The company had reportedly issued a warning last month, saying that the coronavirus pandemic could damage smartphone and consumer electronics sales in 2020, with analysts predicting the outbreak to put the further demand for chips at risk.
In terms of the recently ended quarter, Samsung is expected to report an operating profit of 6.2 trillion won (US$5.05 billion), which would be unchanged as compared to the same time last year. The South Korean electronics giant is a major competitor of Apple, with its Galaxy smartphones being the key rival to the iPhone. The company also manufactures display screens and home appliances.
According to the guidance the company released for the January to March quarter profits, it could feel considerable pressure over the next few quarterly periods owing to the severe impact of retail outlet and manufacturing unit shutdowns caused by the coronavirus. Apple Inc. also rescinded the profit estimations earlier in the year in response to the suspension of production and retail store shutdowns across China.
After China reported the outbreak towards the end of 2019, the decision of Samsung to spread out its manufacturing operations into countries like India and Vietnam seemed a solid strategy, as rival companies faced a disruption in supplies due to factory shutdowns and locked down areas in China.
Now, with the global threat of COVID-19, Samsung itself has been forced into closing retail stores and factories across the Europe, U.S. and India. The condition has affected the investor sentiments and the shares of Samsung Electronics have dropped 15% this year so far, although outperforming the 22% plunge across the wider market.