Samsung and LG grow through the coronavirus

[팍스넷뉴스 류세나 기자] Samsung Electronics and LG Electronics showed their potential despite the Corona 19 crisis last year. LG Electronics recorded all-time highs in both sales and operating profit, and Samsung Electronics also recorded its second operating profit in history following the golden age of semiconductors in 2018. There were situations such as the suspension of factory operations and reduction of offline demand, but the increase in non-face-to-face demand rather played a role in driving earnings growth.

◆ Samsung Electronics, Cash Cow is definitely a semiconductor… Half the profit comes out from semiconductor

Last year’s tentative sales, announced by Samsung Electronics on the 8th, amounted to 23.6 trillion won. Sales increased by 2.5% from last year, but operating profit increased by 29.5% to 35.9 trillion won.

The reason why Samsung Electronics was able to make the most profit in two years is by far the improvement of the semiconductor industry, which is a key axis of the company. This is because memory semiconductor prices rebound as IT demand increased.

According to market research firm DRAM Exchange, the fixed price of memory semiconductor DRAM (DDR4 8Gb) last year rose from $2.8 at the beginning of the year to $3.3 in June of the same year. Compared to the $6 level in early 2019, it is only half the level, but experts analyze that it is showing a recovery trend.

Thanks to this, the market estimates that the 2020 operating profit of the device solution (DS) division, which is in charge of the semiconductor business of Samsung Electronics, will increase by 35% from the previous year to 19 trillion won. If it meets the market forecast, about 52.9% of the total annual operating profit comes from the DS division.

The consumer electronics (CE) division is also a strong support for Samsung Electronics. Sales of customized products such as’Bespoke’ increased significantly, and TVs also sold more than 49 million units (based on Omdia aggregated), which is an increase from 2019 (44.07 million units) on an annual basis, serving as a benefit to increase performance. It is estimated that the operating profit of the CE business last year was 3.5 trillion won, a 40% increase from the previous year.

◆ “Household appliances are LG” Household appliances, a still filial item

Last year’s provisional sales, compiled by LG Electronics, were 63,2638 billion won and operating profit of 3,191.8 billion won. This is an increase of 1.5% and 31.0%, respectively, compared to the previous year, the highest ever. In particular, it is the first time in 2020 that LG Electronics’ annual operating profit exceeded 3 trillion won.

As the modifier’Home appliances are LG’, the driving force behind LG Electronics’ record-high performance is in household appliances (H&A). As demand for pent-ups increased due to the corona, sales of premium home appliances such as stylers (clothing dryers), washing machines, dryers, and dishwashers also increased.

In particular, it is very encouraging that it surpassed US Whirlpool by more than 300 billion won in accumulated sales until the third quarter of last year. In the industry, LG Electronics’ H&A division is expected to exceed Whirlpool’s record for the first time on an annual basis. It is estimated that the H&A division would have performed more than three times last year’s operating profit (122 billion won) in the fourth quarter of this year alone.

The HE business division, which is in charge of the TV business, also supported LG’s earnings expansion by expanding sales volume. Last year, LG Electronics unveiled a variety of new products, including the rollable TV’LG Signature All-Red R’and the space interior home appliance brand’LG Object Collection’.

Securities market predicts that LG Electronics’ performance this year will be better than last year. It is also predicted that LG Electronics’ net operating profit, excluding affiliates, will exceed 3 trillion won per year.

Roh Gyeong-tak, a researcher at Eugene Investment & Securities, said, “The demand for premium home appliances and TVs is creating new growth due to the change in life trends and polarization of consumption due to Corona 19. This will play an important role as an important cash cow for LG Electronics, heading for the highest performance ever I will.” He added, “In particular, the pace of profit improvement in smartphones and electronic equipment divisions is expected to accelerate,” he added. “The electric equipment division will become the company’s third-largest business group due to the increase in parts supply due to the full-scale electric vehicle projects of customers.”

Reporter Ryu Se-na [email protected]

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