Samsung's quarterly profit surges on chips, consumer electronics

Revenue from its mobile division declined due to the pandemic and ongoing component shortages.

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Chips and consumer electronics were Samsung's second-quarter stars.

James Martin/CNET

Samsung's operating profit showed strong growth in the second quarter, thanks to higher-than-expected chip prices and continued consumer demand for electronics during the pandemic.

The Korean electronics giant reported an operating profit for the three-month period ended June 30 of 12.5 trillion won ($10.8 billion), an increase of 54% compared with the same time period last year. Its revenue increased by nearly 20% to 63.6 trillion won ($55.2 billion).

Samsung's fourth-consecutive quarter of sales and profit growth marks a full-year rebound for Samsung, which in the year-ago period reported a 7.4% decline in sales as its consumer-facing businesses struggled while the coronavirus ravaged the globe.

The bread winner for Samsung in the second quarter was its semiconductor business, accounted for more than half of the company's operating profit and nearly 35% of its sales. Samsung semiconductor business recorded sales were up 25% to 22.74 trillion won ($19.7 billion) and operating profit increased 27% to 6.93 trillion won ($6 billion).

Samsung credited the rise to strong demand for server and PC memory, as well as stronger-than-expected increases in average sales prices for both DRAM and NAND chips. But Samsung expects the components supply problems to persist in the second half, the chip market is expected to see supply problems for components persist, and it may face risks from variant COVID-19 viruses and geopolitical tensions.

"Once again, Samsung has benefited from the fact that it has multiple revenue streams including handsets and device solutions," Fiona Vanier, senior analyst for CCS Insight, said in a statement. "Given the increased demand for chips at a time of shortages, and the resulting price inflation, it should be a strong area for Samsung."

Its consumer electronics business also scored well, reporting sales of 13.4 trillion won, an increase of 20% year-over-year, on increased sales of products such as the recently launched Neo QLED, which features a revamped backlight system based on Mini-LED.

Samsung sells more phones and TVs than any other vendor but said revenue from its mobile division declined in the second quarter compared with the previous quarter due to COVID-19, the ongoing component supply shortage in the industry as well as production disruptions. The mobile division recorded sales of 21.43 trillion won ($18.6 billion) in the quarter, a decrease of 24% from the previous quarter but up 8% year-over-year.

Looking ahead, Samsung said it expects the mobile market to begin to return to pre-COVID-19 levels in the second half of the year, buoyed by 5G adoption.

A one-time gain helped boost the company's display panel business, which turned in sales of 6.87 trillion won for the quarter, a 2% gain despite weak demand for mobile products.