Samsung Expects Profit Surge On Demand For High-Speed Computing And Huawei Orders

A woman walks past an advertisement for the Samsung Galaxy Z Fold 2 and Z Flip smartphones at a … [+] Samsung Electronics store in Seoul on October 8, 2020. JUNG YEON-JE/AFP via Getty Images Samsung Electronics Co., the world’s largest manufacturer of consumer electronics, said on Thursday that its […]

Samsung Electronics Co., the world’s largest manufacturer of consumer electronics, said on Thursday that its operating income was $10.6 billion over the three months ending in September, an upsurge that signals increasing demand for high-speed computing and smartphone chips.

That figure marks a 58% gain compared to the same period a year ago. The $279 billion Korean tech giant anticipates third-quarter sales of about $57.3 billion, its preliminary results show. Sales at that level would beat the third quarter of last year by 6.5%.

Recent demand for processors that enable high-speed computing are said to be boosting revenues for Samsung as well as other major chipmakers, including fellow Asian tech giant Taiwan Semiconductor Manufacturing Co.

“Samsung’s earnings are expected to be strong mainly due to the increase in the demand for high-speed computing,” says Liu Wen, an industry analyst with the Market Intelligence & Consulting Institute in Taipei. “The increase in demand for high-speed computing is currently far beyond the original expectations of foundries around the world.”

The market behind high-performance computing should expand at a compound annual growth rate of 6.13% from now to 2025, market research firm Mordor Intelligence says. The firm points to new investments in AI, industrial IoT and electronic design automation.

Silicon Valley giant Nvidia, for example, used Samsung’s chipmaking process to build its latest GeForce RTX 3000 series graphics processing units, Liu notes. The units run up to twice as fast as the previous version and “market acceptance has been remarkable,” he says.

Apple’s plan to announce its iPhone 12 next week helped Samsung’s latest earnings by reducing smartphone competition in the third quarter. Samsung is best known among consumers for its Galaxy brand handsets.

Huawei became the world’s largest smartphone maker in the second quarter, but Samsung stands to regain the top spot as the Chinese handset developer just lost access to some of its core components. U.S. Department of Commerce rules issued in August, effective September 15, restrict companies with U.S. licenses from selling to Huawei or its subsidiaries. Most of the world’s biggest tech hardware firms depend on the U.S. market, its upstream technology or both.

But a “spike” in Huawei orders for Samsung’s memory chips probably “helped to provide a big boost, even if only a short-term one” in the third quarter, says Bryan Ma, vice president of client devices research with market analysis firm IDC in Singapore.

Huawei placed “massive orders” to Samsung clients before the U.S. order took effect, Liu believes. “This has boosted Samsung’s earnings as a result,” he says.

Demand for high-speed computing will grow into next year along with 5G applications, Liu says. He expects both trends will bolster the semiconductor industry in 2021.

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