Samsung Electronics’ First-Quarter Estimates Outperforms The Skeptics In Coronavirus Crisis

Samsung Electronics again proved its dynamic role as South Korea’s leading manufacturer, surprising analysts with an estimated first quarter operating profit that exceeded expectations and buoyed hopes for the Korean economy weathering the storm of the coronavirus crisis.

Defying forecasts that Samsung’s first quarter operating profit would go below the level of 6.23 trillion won from the first quarter of last year, the electronics giant reported estimated operating profits of 6.4 trillion won (about $5.2 billion) for January through March, an increase of 2.7%. Yonhap Infomax, crunching information from leading brokers in Seoul, had forecast an operating profit of 6.19 trillion won. As for total sales, they were likely to hit 55 trillion won for the quarter, up 5% the same period last year.

That was crucial news for the Korean economy since Samsung and others were presumed to have suffered as a result of the crisis in which outbreaks of COVID-19 forced Samsung and other industries to shut down plants or at least reduce their hours. It was in late January, the first month of the quarter, that the first case of the disease was reported in Korea after it had broken out in the Chinese industrial city of Wuhan.

“Samsung has made strong long-term investments in non-memory semiconductors,” notes Geoffrey Cain, author of the newly published Samsung Rising. Samsung is currently in the early stages of a $116 billion investment in semiconductors, including in non-memory chips like application processors.

More on Forbes: What’s Next For Samsung? That’s The Question In Saga Of Korea’s Biggest Conglomerate

The upbeat numbers for Samsung, however, did not mean the company had pulled out of the coronavirus crisis entirely unharmed. In fact, the increase largely reflected the global need for ever more memory chips as more people are working from home during the coronavirus pandemic, boosting demand for memory chips from data centers. Samsung and fellow Korean tech giant SK Hynix are the top two makers of these memory chips.

Detailed figures due to be released by the end of April are likely to show that sales of smartphones and appliances have suffered during the crisis in which buyers around the world are spending less as factories, shops and stores lay off workers and consumers in general are spending less. The worry is that Samsung Electronics might not be able to sustain such high numbers if the crisis persists and life fails to return to normal in the U.S. and Europe—two huge markets hit hard by the coronavirus.

For now, however, the numbers were so high as to confound doubters and skeptics who had foreseen an economic slump in Korea.

“Clearly, the worst effects of the coronavirus are yet to be seen in Samsung’s results, which is likely true for other companies as well,” says a veteran Korean business analyst in Tokyo, asking not to be quoted by name.

“But the company—and the larger South Korean economy of which it is the key cog—has proven its resilience over and over again through a host of previous crises,” the analyst says. “Those experiences will surely help Samsung and South Korea weather the rocky quarters that may lie ahead.”

Cain, whose book on Samsung has just been published, shares the optimism. “The foundations of the business are still strong,” he says. “The effects of the coronavirus on its supply chains will pass.”