Samsung Flags Chip Recovery, Shrinking Phone Market Amid Coronavirus Outbreak

Samsung Electronics said on Wednesday the coronavirus pandemic would hurt sales of smartphones and consumer electronics this year, while demand from data centres would fuel a recovery in memory chip markets.

Chief Executive Kim Ki-nam said the coronavirus and US-China trade disputes were casting a shadow over the outlook for the South Korean tech giant, whose Galaxy smartphones vie with Apple's iPhones for global dominance.

“The global smartphone market was expected to turn to growth this year, but with virus showing signs of being prolonged, the smartphone market is contracting. But 5G smartphone demand is expected to rise,” Koh Dong-jin, president of Samsung's mobile and network business, told the annual general meeting in Seoul.

While the smartphone market would shrink, Kim said the chip market - which makes up about half of Samsung's operating profit - would see demand growth after a slump last year exacerbated by excess supply and US-China trade tensions.

Other chipmakers like Broadcom have either cut or pulled their sales outlook due to disruptions caused by the coronavirus outbreak, but global leader Samsung said it expected investments from data centre firms and new opportunities in areas such as 5G wireless networks and automobiles to drive chip sales higher in 2020.

At the same time, Kim said he expected chipmakers to focus on upgrading manufacturing processes rather than expanding capacity this year, limiting supply.

Samsung Elec shares were up 0.6 percent as of 0120 GMT, compared to a 0.5 percent fall of the broader market.

Shareholders scanned
Samsung's annual general meeting drew a crowd of only about 400 shareholders this year, sharply down from about 1,000 last year, as South Korea battles the biggest coronavirus outbreak in Asia outside China.

Investors were scanned with thermal cameras and checked with thermometers as they arrived, and sat two seats away from each other as part of measures to ensure the meeting could go ahead safely.

Samsung Electronics also adopted electronic voting for the meeting and encouraged shareholders to cast votes online.

Kim Hyun-suk, the company's consumer electronics chief, said it was too early to predict how the virus would impact on consumers.

"We had expected the consumer electronics market to rise slightly this year, but with the coronavirus fast spreading, uncertainties are growing faster than ever, and it is very difficult to predict the future," he said.

© Thomson Reuters 2020

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