Samsung and LG’s profits soar

“The first quarter of this year will be the best quarter ever”, which is indeed the best quarter for the two big electronics companies in South Korea. On April 7, South Korea’s electronics giants released their first quarter performance forecasts one after another: LG, which gave up its mobile phone, set a single quarter’s highest performance; Samsung, which suffered a setback in semiconductor, also handed in its amazing report card. This is the best quarter. Maybe it’s because the companies have accumulated a year’s wealth, but maybe it’s just a dazzling and short-term rebound after a long epidemic.

三星LG利润齐飙升 手机家电各显其能

After LG broke its arm

According to the performance forecast released by LG Electronics, sales in the first quarter of this year will increase by 27.7% year-on-year to 18.81 trillion won, higher than the 17.9 trillion won generally expected by the market; sales growth is nearly 1 / 3, and LG’s operating profit in the first quarter of this year will soar by 133.4% month on month, far exceeding the market expectation.

“Sales and profits both set the highest record in a single quarter”, LG’s performance forecast can hardly hide its pride.

Although it has not yet released detailed results, LG has made a high-profile announcement: the main driving force of the performance is the increase in OLED TV sales, which has driven the sales of the Department to increase by more than 30% year on year.

LG, the world’s largest OLED TV supplier, divested its TV business from its home appliance business, while Eugene investment predicted that “the performance of this sector will exceed market expectations.”.

Dividends also spill over to the whole household appliances sector. Many securities companies even believe that LG’s sales and operating profits of household appliances may exceed 6 trillion won and 800 billion won respectively.

Zhang Xiaorong, President of deep science and Technology Research Institute, also told Beijing Business Daily that during the epidemic period, the sales of home appliances and TV sets were obviously affected by home consumption. At the same time, since the beginning of this year, the economy has gradually recovered, and the rebound speed of consumer demand is amazing. Therefore, the sales of home appliances have increased significantly.

Announced to withdraw from the mobile phone market just two days after the release of the performance forecast, LG can be described as a brave artist. But it is a good move for LG to throw away the burden of mobile phone business: the best choice is to survive after 23 quarters of losses. In 2017, LG mobile withdrew from the Chinese market, even sold its headquarters building in China, and returned to the home appliance market with an 8 billion yuan “breakup fee”.

Although LG mobile lost, it was also a “strategic retreat”. In this performance forecast, LG specially added a sentence that the smartphone Department narrowed the loss margin through personnel and business adjustment. The market estimates that after this round of adjustment, LG’s mobile phone division will suffer an operating loss of about 280 billion won.

Although the performance is brilliant, the capital market does not pay for the consumption dividend in a special period. On the same day, LG Electronics shares closed down 0.94% to 158500 won per share, underperforming the 0.33% rise in the Korean composite stock index.

Samsung’s surprise

Arsenic of a, honey of B. What LG abandons is what Samsung relies on.

According to the preliminary results released by Samsung Electronics, the revenue in the first quarter will grow by 17.5% year-on-year, and the profit growth will be as high as 44%, reaching a new high in the same period since 2018. Samsung’s smartphone, which was released at the beginning of the year, was the driver of its performance in the first quarter.

According to the statistics of South Korean investment company Eugene securities, Samsung’s smartphone shipments in the first quarter are expected to reach 76 million units, up 25% year on year.

After experiencing the “darkest moment” in 2020, Samsung is consciously and “premeditated” to improve its first quarter performance. For example, the galaxy S21, released at the beginning of the year, was released one month earlier than the previous generation S20, and the price of each product was $200 lower than the previous generation. In March, Samsung even launched more than four TV and mobile phone products.

However, such a good result is beyond Samsung’s expectation. LG is the world’s largest OLED supplier, while Samsung is the world’s largest memory chip manufacturer. The epidemic is like a lever, pushing up home consumption demand, but Samsung’s semiconductor production has been frustrated again and again.

Just a few days ago, Samsung worried that the company’s operating profit in the first quarter may decline by 60% compared with the same period last year due to the oversupply of memory chips, the slowdown of display panel sales and the loss of profit margin caused by the intensified competition of smart phones.

Samsung’s concerns come from a snowstorm in February. The blizzard caused a blackout in Texas. Samsung’s semiconductor plant in Austin, Texas, was shut down for a month. The end use of auto parts and smart phone chips was even affected. Some analysts estimated that the incident caused Samsung Electronics about 300 billion won in losses, slightly dragging down the company’s performance in the first quarter.

In this performance forecast, Samsung specially explained this situation: “the new flagship smartphone and strong electronic product sales released earlier offset the impact of the power outage in Texas.”

Similar to LG, Samsung’s TV and home appliance business is also strong. According to market forecasts, the profits of Samsung’s TV and home appliance businesses may more than double to around 1 trillion won.

A reporter from Beijing business daily contacted Samsung for an interview. As of press release, no reply has been received.

Different roads

Samsung did not expect the economy to rebound so quickly from the epidemic. Semiconductor also due to the shortage of tide, price rises, losses caused by the Blizzard or will be recovered in the spring.

Analyst wakasugi pointed out: “Samsung’s new generation of dynamic random access memory will be launched in the second half of 2021, and the semiconductor price rise will also play a role from the second quarter. The interaction between the two will further boost Samsung’s sales, which will promote the performance rebound of Samsung’s semiconductor division at that time.”

However, the previous blackout in Texas still “scared” Samsung. Samsung Electronics originally planned to invest 17 billion US dollars to build a semiconductor factory in the United States, but the factory in Austin, Texas, was shut down due to power failure. Samsung also complained about the local infrastructure equipment, and the investment plan ran aground. Since then, Samsung Electronics and Texas launched a seesaw war on investment support policy, and it is still inconclusive.

Samsung aims at semiconductors, while LG opens up a new path for the automotive industry. As for more than 3700 employees in the mobile phone business, LG Electronics said that they might be transferred to its home appliance factory and Research Institute in South Road of Qingshang, its auto parts (VS) business, and its joint venture with Magna.

Among them, in addition to the home appliance factory, other options are the car world. At the end of last year, LG Electronics and Magna, a Canadian auto parts manufacturer, announced a $1 billion joint venture to produce electric vehicle related parts. That’s when the new business opens in July.

Although LG Electronics’s vehicle parts Solutions Division will still be in a loss state in the first quarter, industry observer Hong Shibin believes that LG Electronics’s withdrawal from the smartphone market will have an effect from the second quarter of 2021, and the company plans to vigorously develop the business of home appliances and auto parts division, and the operating profit is expected to reach 4 trillion won this year.

Beijing Business Daily reporter Tao Feng Chang Lei

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