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Samsung Q3 operating profit hits a new high in 8 quarters

Time:2020-10-12 Views:406
A few days ago, Samsung released its profit forecast for the third quarter of 2020. The estimated revenue is about 66 trillion won, an increase of 24.56% from the previous quarter and a year-on-year increase of 6.5%. The operating profit is approximately 12.3 trillion won, an increase of 50% from the previous quarter. An increase of 57.7%, revenue and operating profit exceeded market analysts’ expectations, and operating profit hit a two-year high.

Samsung‘s semiconductor and mobile divisions are its two largest divisions and are the main drivers of its profitability. Since 2018, affected by the cyclical downturn of the storage industry, Samsung’s quarterly operating profit has been showing a continuous downward trend, and fell to a trough in 2019. It will return to the upward trend in 2020 and reach the highest value in Q3. Driven by the demand for mobile services, and the price of consumer memory chips rebounded in September.
Apple’s new iPhone is delayed, Huawei’s mobile phone business is limited, Samsung’s mobile phone business will benefit

In the first half of 2020, due to the “epidemic” restraining mobile phone sales, the demand for smartphones improved in the second half of the year. Coupled with the delay of the launch of Apple‘s iPhone, Huawei‘s mobile phone business is limited, and Samsung‘s smartphone sales are expected to grow substantially from the previous month.

It is reported that Huawei’s global shipments of mobile phones reached 105 million in the first half of 2020, but Yu Chengdong estimated that the 2020 full-year shipment target may be less than 200 million. In other words, Huawei‘s smartphone shipments in the second half of 2020 will be less than 100 million units. If we look at Huawei’s shipments of more than 120 million in the second half of 2019, there will be a gap in shipments of more than 20 million smartphones, which will give opportunities to other mobile phone manufacturers such as Samsung, OPPO, VIVO, and Xiaomi.

On the other hand, in the past, Apple’s new iPhone was launched in September, which has driven Apple’s Q3 sales to grow rapidly compared to the previous month. However, due to the impact of the “epidemic”, the delay of Apple’s new iPhone to October in 2020 will result in a significant decline in Q3 sales. Give Samsung an opportunity to expand its market share.

According to estimates by relevant industry insiders, the sales of Samsung smartphones in Q3 2020 is expected to increase to 80 million units, which is an increase of more than 40% compared with the 54.2 million units shipped in Q2. The operating profit of the mobile segment, which focuses on mobile phone business, is expected. It will reach 4.5 trillion won, which will be a substantial increase from the 1.95 trillion won in the previous quarter.

Huawei’s “hoarding” effect + rising prices of consumer memory chips offset the impact of weak demand

Originally affected by the cooling demand in data centers, enterprises and other fields, the price of memory chips in the server market has declined slightly, and consumer NAND Flash and DRAM prices have fallen significantly in July and August. Samsung’s Q3 performance may be dragged down by sluggish demand. However, due to the dual favorable factors of Huawei‘s "hoarding" and consumer memory chip prices rebounding in September, Samsung‘s Q3 performance exceeded market expectations.
First of all, in order to alleviate the subsequent "off-supply" crisis caused by the U.S. ban, Huawei stockpiled a large number of goods before the ban took effect, and the additional orders were larger than previously estimated, plus Apple, Xiaomi, OPPO, VIVO, etc. in September Traditional stocking requirements have increased orders for NAND Flash and DRAM chips, which has given Samsung‘s semiconductor business more momentum.

Second, the prices of consumer DRAM and NAND Flash products finally experienced significant price increases in September after experiencing a sharp drop in July and August. According to ChinaFlashMarket‘s quotation, the comprehensive price of consumer NAND Flash increased by 10% in September, the overall price of DRAM also increased by more than 5%, and the price of some memory products even increased by 10%.
In addition, the memory modules equipped with Huawei notebooks and Lenovo gaming laptops basically start from 16GB, and SSDs basically start from 512GB. In addition, game consoles such as Sony PS5 and Microsoft Xbox are equipped with 825GB and 1TB SSDs. The demand for memory sticks and SSDs has effectively compensated for the previous weak demand, allowing Samsung‘s storage business to maintain a stable trend.

Samsung‘s Q4 performance is expected, but still cautious about uncertain factors

Looking ahead, the phenomenon of the "epidemic" pandemic is still not over, and its impact on the global economy and capital markets is still going on. Q4 storage market demand is still facing challenges. Second, the US’s “ban” on Huawei has been in effect for more than half a month. At present, only AMD and Intel can supply Huawei. Other companies have not made significant progress. Currently, storage devices such as Samsung, SK Hynix, Micron, and Kioxia The factory is still in the stage of "cut supply" to Huawei.

Micron stated in its latest quarterly earnings report that Micron had stopped shipping to Huawei on September 14 because Huawei accounted for about 10% of Micron’s Q4 fiscal quarter (June-August 2020) sales, and will The ability to transfer production capacity to other customers on a large scale is limited, so it will have a large negative impact on Micron’s fiscal 2021 Q1 sales, and it will also have a certain impact on the Q2 quarter.

SK Hynix is ​​also Huawei‘s main memory chip supplier. Huawei contributes about 10% of sales. If there is no new customer order to fill the gap in time, future performance will also be affected. As for Samsung, Huawei’s contribution to Samsung is less than 5%, so comparatively speaking, the pressure on Samsung’s storage business is relatively small, and thanks to smartphones driven by the e-commerce shopping demand years ago, it is expected to maintain a strong trend , Samsung’s overall profitability will also be significantly improved.
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