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Samsung's profit jumps 58% in 3Q as Huawei ramps up chip orders

Rival LG gets a boost from record-high TV demand amid pandemic

Samsung is set for another strong quarterly performance, this time thanks to a rush of orders from China's Huawei Technologies.    © AP

SEOUL -- Samsung Electronics said Thursday that its operating profit jumped 58.1% to 12.3 trillion won ($10.6 billion) in the third quarter year-on-year, hitting its highest level in two years.

The world's largest smartphone maker said that its sales increased 6.5% to 66 trillion won during the same period in its earnings guidance. Other earnings data will be disclosed later this month.

Rival LG Electronics, meanwhile, announced its third-quarter operating profit jumped 22.7% on the year to 959 billion won. The company's sales increased 7.8% to 16.9 trillion won during the same period.

Analysts attributed Samsung's strong showing to increased memory chip orders from Huawei Technologies before the latest U.S. sanctions on the company went into effect on Sept. 15. The U.S. Department of Commerce now requires global chipmakers to obtain a license to sell products made with U.S. technology to the Chinese company.

"We believe there was a rush of orders from Huawei due to U.S. sanctions," said CW Chung, a senior analyst at Nomura. "The additional order from Huawei seems to be bigger than what we had previously estimated."

The announcement comes as Apple looks set to unveil the iPhone 12 next week. The California-based company is expected to release its first 5G smartphone, following in the footsteps of Samsung and Huawei, which released their own models last year.

Samsung and Huawei led the global smartphone market with 20% of market share each in the second quarter, followed by Apple with 11%, according to Counterpoint Research.

Experts say that the U.S.-China conflict may help Samsung maintain its tech leadership against Chinese rivals, including Huawei and Semiconductor Manufacturing International Corp., China's biggest chipmaker. SMIC said on Sunday that the U.S. Commerce Department issued letters to its American suppliers alerting them that "accessories and raw materials to SMIC will be subject to further restrictions."

"For Samsung, it is very good that the U.S. is cracking down on Chinese tech companies that have chased it quickly," said the head of a local research center, asking not to be named. "I am sure Samsung is very happy with it."

For LG, the world's second-largest TV maker, analysts say strong demand in North America was likely behind the strong performance. TrendForce, a Taipei-based research firm, said quarterly TV shipments reached a historic high of 62.1 million units in the quarter, up 12.9% from a year ago.

"Owing to a 20% increase in TV demand in North America, as well as the fact that TV brands had deferred their shipment schedules in the first half of 2020 due to the COVID-19 pandemic, the effects of the third-quarter cyclical upturn were further compounded in 2020," TrendForce said in a press release.

Shares of LG closed down 2.91% on profit-taking, while Samsung shares were down 0.33%.

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