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Samsung Looks To Be Cashing In As Huawei US Ban Continues To Take Effect

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Samsung Electronics is an ancillary to the Samsung Group as an entity. As the US sanctioned its Chinese competitor Huawei Technologies Co, it gave Samsung Electronics the edge to boost its earnings. Samsung Electronics recently marked an increase of approximately 60 percent in its third-quarter operational profits.

Before its recent sales bump, we must say that Samsung has been the top smartphone maker in the world. They said that their operational profit came in at 12.3 trillion won from July to September, which equals $10.6 billion compared to the 7.8 trillion won profit by this time last year

Samsung has a huge impact on the South Korean economy. The Samsung Group subsidiaries include Samsung Engineering, Samsung C&T Corporation, Samsung Heavy Industries, Samsung Electronics, Samsung Life Insurance, etc. although the Samsung Electronics happens to be the largest of the Samsung controlled conglomerates. Samsung Electronics is also known to control the business sector in the south Korean economy. “Its overall turnover is equal to a fifth of the South Korean GDP,” and if you want to know how huge Samsung is, South Korea is the 12th largest economy in the world by GDP. It has a GDP of over $1.6 trillion and is home to many technology breakthroughs including AI and VR.

On behalf of the Euromonitor International Korea, James Kang said that the Samsung’s rollout of its newest premium mobile phone devices, the Galaxy Note 20 and the Galaxy Z Fold 2, launched in August brought about the massive sales performance of mobile phones, making them a dominant force in the smartphone industry. Samsung was the number one smartphone maker in the world until Huawei pushed them off the number one spot in July, 2020.

The US since last year slammed Huawei and other Chinese tech firms with a ban in the United States and since then others like the United Kingdom have followed suit, making sure important software and semi-conductors required for manufacturing smartphones and 5G gear are not accessible to Huawei.  This has given a bigger opportunity to other smartphone makers like Samsung to sell even more smartphones.

Whereas Kang Min-soo, an analyst at Counterpoint Research, said: “US sanctions against Huawei were becoming a big factor affecting the global smartphone market. It will be a good opportunity for Samsung to increase market share in Europe, where it has been competing with Huawei in various price bands.”

MS Hwang, an analyst at Samsung Securities, told Bloomberg News that Huawei had stocked about six months’ worth of extra inventory before the US ban took effect on September 15. Huawei’s purchases offset weakness in server-use demand and devour market inventory, which should affect prices down the road.

Analysts have forecasted the diminishing prices of chips will also affect Samsung’s performance by the end of the year. Although Samsung Electronics is the largest manufacturer of memory chips and they control the Dynamic random-access memory (DRAM) market owning 43.5 percent of shares as of April to June 2020

According to TrendForce (a stock-market research platform) “Server DRAM chips enjoyed a boost as the pandemic prompted working from home and online classes but were now experiencing significant oversupply.”

Therefore, contract prices of server DRAM products continue to descend to new lows, it went on, forecasting a 13-18 percent drop in the fourth quarter. Despite the optimistic forecast, Samsung Electronics shares closed down 0.3 percent on Thursday.”

With Samsung as the main tech leader in South Korea, it leaves the LG Electronics as the second biggest South Korean electronics firm, whose profit was down 2.9 percent even though they predicted the third-quarter operating profit would be a 22.7 percent increase year on year, which is equivalent to 959 billion won. In contrast, Samsung Electronics reserves its net profit and the performance data of each of its sectors but is set to release its final revenue report by the end of the month.

Finally, the Samsung group tends to be facing many challenges at this period; the vice-chairman Lee Jae-Yong is forced to retire over an extensive corruption scandal, which could take him back to prison. The issues with the Vice-chairman could also deprive the Samsung group of its major decision-maker and no one can tell as of now how that may affect their earnings in future.

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