On a consolidated basis, Samsung Electronics announced its fourth quarter 2020 results with sales of 61.55 trillion won and operating profit of 9.05 trillion won.
In 2020, it recorded sales of 236.81 trillion won and operating profit of 35.99 trillion won.
Sales in the fourth quarter fell 8.1% QoQ to 61.55 trillion won due to intensifying competition for set products and a decline in memory prices. Compared to the same period of the previous year, it increased 2.8% due to improved parts demand.
Operating profit decreased by 3.3 trillion won from the previous quarter to 9.05 trillion won due to a decline in memory prices, a decrease in sales of the set business, an increase in marketing expenses, and negative exchange rates, and the operating margin also fell to 14.7%. Compared to the same period of the previous year, both operating profit and margin increased due to the improvement in the display and memory market conditions.
Although demand for memory semiconductors was solid, mainly for mobile and consumer applications, the average selling price (ASP) continued to decline, negative exchange rates, and initial costs related to mass production of new lines.
For system semiconductors, orders from major global customers increased, but profits declined QoQ and YoY due to the weak dollar.
As for DP (Display Panel), the utilization rate of small and medium-sized panels increased sharply and the performance of the large panel market improved significantly compared to the previous quarter and the same period last year.
For wireless, sales profit declined due to intensifying competition and higher marketing expenses at the end of the year, but continued efforts to improve cost structure maintained a solid double-digit operating margin of the previous year. The network’s performance improved thanks to response to domestic 5G expansion and expansion of overseas 4G and 5G sales.
During the peak season at the end of the year, sales of CE continued to be strong, mainly in advanced markets, but profitability declined due to the impact of rising costs.
Regarding the welcome direction in 4Q, most of the currencies of the dollar and euro and major emerging market currencies weakened significantly compared to the won, resulting in a negative impact of about KRW 1.4 trillion compared to the previous quarter, mainly from the parts business.
◇Q1 outlook
In 1Q, wireless performance is expected due to the early launch of the’Galaxy S21′, but company-wide profitability is expected to decline due to worsening performance in the parts business such as memory and display.
Memory earnings are expected to decline due to negative welcoming trends and initial costs for new lines, despite continued mobile demand and data center demand recovery.
System LSI will expand the supply of SoC (System on Chip), CIS (CMOS Image Sensor), and DDI (Display Driver IC) for flagship smartphones, and the foundry will expand production of EUV 5nm SoC and 8nm High Performance Computing (HPC) chips. Is expected.
In the case of small and medium-sized panels, DP is expected to significantly deteriorate QoQ, but compared to the same period of the previous year, OLED adoption is expected to increase, leading to improved performance. In the case of large-sized panels, we will continue to transform the business structure based on QD technology.
Wireless earnings are expected to improve thanks to increased sales of flagship products such as the’Galaxy S21′ and the launch of new mid- to low-end models.
CE sales are expected to slow amid the seasonal off-peak season, but robust earnings are expected on timely launch of new products and increased sales of premium products.
◇Outlook for 2021
This year, there are always risks such as the re-proliferation of Corona 19, but global demand is expected to recover.
The memory semiconductor industry is expected to recover in 1H12 due to solid mobile and server demand, but global economic uncertainties such as the exchange rate are also expected.
Samsung Electronics plans to accelerate the conversion of 1z nano DRAM and 6G V-NAND, while enhancing cost competitiveness and market leadership by expanding EUV application.
System LSI is actively responding to the 5G SoC and high-pixel sensor market with differentiated products, and the foundry plans to accelerate its growth by expanding mass production of EUV 5 nanometers and diversifying applications.
In the case of small and medium-sized panels, DP plans to continuously improve technology differentiation and price competitiveness, and in the case of large-sized panels, it plans to focus on establishing the basis for timely development of QD displays.
Wireless is planning to expand smartphone sales by reinforcing flagship products such as’Galaxy S21′ and foldable smartphones, as well as mid- and low-priced 5G lineups, while improving profitability by improving the cost structure.
The network plans to continuously strengthen its global 5G business by expanding new orders.
CE will expand premium products such as’Neo QLED’,’Micro LED’, and Bespoke home appliances, enhance marketing efficiency and enhance online sales, and build a stable supply chain based on global SCM (Supply Chain Management) capabilities to promote sustainable growth. Is expected.
◇ Facility investment
In 2020, facility investment is about 38.5 trillion won, and by business, it is about 32.9 trillion won for semiconductors and 3.9 trillion won for displays.
Memory investment increased due to the transition to advanced processes to respond to future demand growth and expansion, and the foundry also increased significantly compared to the previous year due to expansion investments such as the EUV 5-nano process.
In the display, investment increased compared to the previous year, focusing on the expansion of QD display production capacity (CAPA) and small and medium-sized new technology processes.
◇Details by category
△ Semiconductor
Semiconductors recorded 18.18 trillion won in sales and 3.85 trillion won in operating profit in the fourth quarter of last year.
In the memory business, demand was solid as the mobile market showed strong growth in 4Q and the data center and PC markets were also healthy.
However, earnings weakened due to continued price declines, a weak dollar, and initial costs for new lines.
In 4Q, DRAM demand showed solid demand thanks to the recovery of smartphone sales, expansion of data center investments, strong PC demand, and the launch of new GPUs.
Demand for NAND for mobile and consumer SSDs was solid, but demand for servers showed a slight weakening in 4Q due to the increase in data center purchases in the first half.
In the first quarter of this year, overall demand for memory is expected to improve thanks to the expansion of the mobile market due to the launch of various new products, increasing demand for data center purchases, and increasing demand for notebooks for non-face-to-face activities. However, earnings are expected to weaken QoQ due to the weak dollar and the initial cost of new lines.
Samsung Electronics plans to strengthen cost competitiveness and market leadership by increasing the proportion of 1z nanometers for DRAM and timely sales, and accelerating the transition to 6G V-NAND for NAND.
This year, it is expected to gradually escape from the effects of Corona 19 and find a growth engine.
For mobile, memory capacity is expected to continue to rise as demand increases in China and 5G mid-to-low-end models are proliferating, and demand for servers is expected to remain solid as data center investments resume and new CPUs are released.
However, the pace of economic recovery remains uncertain, and there are still various uncertainties, such as a weak dollar and initial costs for new lines.
While responding to demand fluctuations through flexible product operation, Samsung Electronics is planning to lead the world’s first next-generation lineup such as 1a-nano DRAM with multi-step EUV and 7th-generation V-NAND.
In the system LSI business, demand for mobile DDI and image sensor products increased due to the launch of smartphones from major customers in the fourth quarter, but earnings declined due to negative welcome. However, it laid a foothold for customer expansion by releasing the first 5-nano SoC product,’Exynos 1080′.
This year, the market is expected to recover due to the release of new 5G products and increased demand by major smartphone makers, and plans to expand the supply centered on 5G SoCs and sensors to promote double-digit sales growth in the division.
The foundry business recorded the largest quarterly sales in the fourth quarter as demand for 5G mobile chips, sensors, and HPC chips increased, but earnings declined due to the weak dollar.
However, Samsung Electronics has proven its cutting-edge process competitiveness by completing the design of the 5 nano 2nd and 4 nano 1st mobile products in a timely manner.
In the first quarter of this year, demand for all processes is strong and the supply shortage problem is expected to persist for the time being. Samsung Electronics plans to flexibly operate the line and focus on the development of the first and second generation of 3 nanometers, which are advanced processes.
In 2021, the foundry market is expected to continue growing thanks to the acceleration of 5G penetration and strong HPC demand, and Samsung Electronics plans to secure the basis for future growth by increasing the production of high-tech processes and expanding the proportion of global customers.
△ Display Panel
In the display business, it recorded sales of 9.96 trillion won and operating profit of 1.75 trillion won in the fourth quarter.
The display business in the fourth quarter achieved the highest quarterly performance due to recovery in demand for major products such as smartphones and TVs.
For small and medium-sized displays, performance improved sharply QoQ due to strong demand from major customers. For large-sized displays, TV and monitor panel demand continued due to the expansion of non-face-to-face services, and the average panel sales price rose, reducing the QoQ loss.
In the first quarter of this year, the small and medium-sized display business is expected to decline QoQ due to a decrease in demand from major customers, but the utilization rate is expected to improve compared to the same period last year as the number of OLED adoption models by major customers increases.
In the large-scale display business, QD display products are prepared for timely release, and we plan to respond to LCD demands of some customers without any problems.
In this year’s small and medium-sized display business, OLED panel demand is expected to increase due to the full expansion of the 5G smartphone market and the recovery of smartphone demand.
As Samsung Electronics strives to expand new applications such as notebook PCs and tablets, Samsung Electronics plans to improve technology completion and cost competitiveness in preparation for the full-scale growth of the innovative product market such as foldables.
In the large-scale display business, we plan to develop differentiated technology QD displays in a timely manner and establish a premium market base through customer diversification.
△ IM (IT & Mobile Communications)
In the fourth quarter, the IM division recorded sales of 22.34 trillion won and operating profit of 2.42 trillion won.
In 4Q, the mobile market is expected to increase QoQ on the back of the year-end peak season and gradual market recovery.
In the wireless business, sales and profits declined QoQ as competition intensified at the end of the year and marketing expenses increased, but continued efforts to improve the cost structure, such as standardizing parts, maintained a double-digit operating margin.
In the network business, performance improved from the previous quarter by responding to the domestic 5G expansion and expanding 4G and 5G businesses in overseas markets such as North America.
In the first quarter of this year, the demand for smartphones and tablets is expected to decrease QoQ as the mobile market enters the off-peak season.
However, in the wireless business, both sales and profits are expected to increase QoQ due to the expansion of flagship sales, an increase in average selling prices and the launch of new mid- to low-priced models following the early launch of the Galaxy S21.
The network business plans to continue expanding business centering on overseas operators such as North America and Japan.
As the 5G market expands in earnest along with a gradual economic recovery this year, market demand is expected to recover to the level before Corona 19.
In the wireless business, the company plans to maximize sales of’Galaxy S21′ and promote the popularization of foldable categories such as’Galaxy Z Fold’ and’Galaxy Z Flip’ to solidify its leadership in the premium market.
In addition, the company plans to expand smartphone sales by reinforcing its competitive mid- to low-end 5G lineup, while continuing to strengthen the foundation for business growth such as tablets and wearables.
In addition, through cooperation with global partners, the Galaxy ecosystem will be further expanded, and efforts to achieve solid profitability such as cost structure improvement and operational efficiency will continue.
The network business plans to actively expand new business while responding to the commercialization of 5G at home and abroad.
△ CE(Consumer Electronics)
The CE division recorded sales of 13.61 trillion won and operating profit of 0.82 trillion won in the fourth quarter.
The TV market in the fourth quarter expanded QoQ due to strong demand for pent-ups centered on advanced markets during the peak season at the end of the year.
Samsung Electronics proactively responded to demand during peak seasons through its continuously strengthened non-face-to-face sales competitiveness, and expanded online sales and O2O (Online to Offline) services.
As a result, sales expanded to focus on high value-added products such as QLED, ultra-large, and gaming monitors, but earnings slowed slightly compared to the previous year due to intensifying competition and various cost increases during peak season.
The consumer electronics market also saw a slight increase in demand as economic activity in emerging markets gradually resumed.
Samsung Electronics’ sales grew QoQ in both advanced and emerging markets, and profitability improved year-on-year by focusing on sales of premium products and flexible high season promotions by region.
The TV market in the first quarter of this year is seasonally off-demand, and demand declines QoQ, but growth is expected from the same period last year.
Samsung Electronics plans to maximize sales opportunities by developing various promotions by country through close pre-cooperation with distribution.
In addition, it plans to successfully launch’Neo QLED’ and accelerate sales structure improvement centering on high value-added products such as ultra-large and lifestyle TVs, focusing on securing growth and profitability.
Global consumer electronics demand in the first quarter is expected to grow year-on-year, and Samsung Electronics plans to continue its growth by launching innovative premium new products and strengthening online marketing activities.
This year’s TV market is expected to be highly volatile due to the impact of Corona 19, but the overall market is expected to be the same as the previous year.
Based on global SCM competitiveness and business experience, Samsung Electronics will establish a sales strategy that can flexibly respond to changes in the market and continue to promote growth.
In addition, with’Neo QLED’,’Micro LED’, which opens a new era of image quality, and’The Frame’, which has been reborn with a slimmer design, is a better product for consumers by expanding sales. I plan to deliver the viewing experience.
This year’s home appliance market is expected to grow year-on-year due to continued demand for pent-ups centered on advanced markets.
Samsung Electronics plans to expand its premium product’BESPOKE’ platform to other product categories while continuing its premium sales growth based on its global SCM capabilities.
◇ESG (environment, society, governance), etc.
Samsung Electronics is doing its best to improve business competitiveness, create environmental and social values, and make great efforts to strengthen governance of sustainability management.
Samsung Electronics has upgraded the Sustainability Management Council, a company-wide consultative body that discusses the company’s sustainability management strategy, to the CFO, so that sustainability management can be reflected in a higher ranking in the overall management decision-making process.
In addition, the Sustainability Management Office, which was operated under the existing Management Support Office, was upgraded to a Sustainability Management Promotion Center under the direct control of the CEO, and strengthened its role as a control tower for company-wide sustainability management. From planning to R&D, marketing, and AS, sustainability was implemented in products and services throughout the entire life cycle.
Samsung Electronics plans to continue strengthening its ESG response in the future to solidify the foundation for sustainable management.