Apple helps Samsung report stronger than expected Q2 earnings estimate

Apple helps Samsung report stronger than expected Q2 earnings estimate
Recently Samsung revealed what its second-quarter earnings numbers should look like when it soon reports the final figures. The manufacturer says that it expects to report a 7% annual decline in second-quarter revenue to 52 trillion Korean won. At current exchange rates, that works out to $46 billion U.S. dollars. Operating profit for the three months ended June is estimated at 8.1 trillion Korean won ($6.6 billion USD), up 23% year-over-year.

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The results topped analysts’ consensus estimates of 51 trillion won in revenue and operating earnings of 6.5 trillion won. Helping Sammy top the analysts’ forecasts was a one-time payment of $950 million that the company received from Apple. DSCC says that the money was due to Samsung when Apple purchased fewer OLED panels from the company than called for by the terms of their contract. Thanks to this payment, Samsung’s display devices unit reported a profit for the quarter instead of a loss. During the same quarter last year, Apple reportedly paid Samsung $770 million for a shortfall in orders for OLED panels. The contract required Samsung to deliver 100 million panels at approximately $70 a pop

Apple remains addicted to Samsung as an iPhone supplier

Apple has been trying to reduce its dependence on Samsung as an iPhone supplier. After all, does Coke buy cola syrup from Pepsi? Samsung has been Apple’s largest supplier of OLED panels for the iPhone and Apple has been looking to add glass from LG and Beijing Oriental Electronics (BOE). However, earlier this year it was alleged that BOE had failed a quality test conducted by Apple. Ironically, BOE reportedly failed a quality test conducted by Samsung who is supposedly considering the company’s OLED displays for the 2021 Galaxy S21 flagship models.

Samsung’s semiconductor business saw strong demand for memory chips used by cloud computing companies looking to expand their capacity as more people are forced to work from home. With prices for DRAM and NAND flash memory chips on the rise, Samsung earned an estimated 5 trillion Korean won during Q2. Samsung’s mobile and consumer businesses were hurt by the pandemic during the three months, but results were not as bad as expected. Still, the company’s flagship Galaxy S20 series is doing poorly in the states trailing the numbers put up by the Galaxy S10 and Galaxy S9 lines in 2019 and 2018 respectively. On August 5th, Samsung is expected to introduce the Galaxy Note 20 line. We also should see in the near future the Galaxy Z Note 2 and the Galaxy Z Flip 5G foldables.
Sammy’s troubles at the cash register could be seen in other data. In April and May Huawei became the top smartphone manufacturer in the world. May’s numbers showed the Chinese manufacturer with a hair-thin lead over Samsung; Huawei was responsible for 19.7% of global smartphone shipments in May compared to Samsung’s 19.6%. What might really hurt Samsung in the U.S. is the ravaged economy. Millions of Americans remain out of work and money that normally could be used to purchase an expensive handset now must be used to put food on the table.
The full second-quarter earnings report will be released sometime later this month. As for Apple, the flip side of the coin is that when it reports its fiscal third quarter earnings on July 30th, it will have to account for the payment to Samsung somewhere in its financial report. Most investors are able to shrug their shoulders at one-time payments like this so it shouldn’t have an effect on Apple. The only negative is that Apple can’t seem to end its addiction to Samsung.

Source: Phonearena


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