Breakingviews - Samsung enjoys Washington gift that keeps giving

Reuters Reuters

HONG KONG(Reuters Breakingviews) - Samsung Electronics can have Huawei's cake and eat it too. The South Korean conglomerate expects to deliver a robust third-quarter performance, as U.S. sanctions forced its Chinese customer to stockpile chips. Taking some of its telecommunications equipment and smartphone business will be the real prize.

Operating profit in the three months to September will reach $10.6 billion, a two-year high, according to preliminary earnings guidance Samsung delivered on Thursday. Rebounding handset sales probably helped, but the company's cash-cow semiconductor division probably got a big boost from Huawei. It had quickly been buying components ahead of restrictions recently imposed by Washington that bar the Shenzhen-based company from buying semiconductors made with American technology without a license.


That means the windfall is likely to be a one-off. The next step will be taking a slice of Huawei's market share. It dominates in telecom gear alongside Nokia and Ericsson. That may change, as the White House renews pressure on countries in Europe and beyond to exclude Chinese kit in their national networks on security grounds. Just last month, Samsung unveiled a near-$7 billion contract to supply U.S. carrier Verizon with network infrastructure over five years. It's a major win for the company’s scandal-hit heir, Jay Y. Lee, who has been trying to crack the market for years.

Smartphones are another opening. This year, Huawei dethroned Samsung as the world's top handset maker by shipments, according to second-quarter data from industry tracker IDC. That looks unsustainable. American officials have restricted Huawei from accessing U.S. technology, including Google's Android mobile operating system and app store. That has already hurt sales outside of China, and should help juice pandemic-hit demand for Samsung's new $1,000 flagship model.

Samsung shares are up 7% this year, lagging the 36% jump from chip-making rival, Taiwan Semiconductor Manufacturing. Choppy demand for memory chips is one reason; Lee's legal troubles and corporate governance issues may be another. Either way, the performance seems to underappreciate a gift from Washington that should keep on giving.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Technology Videos

    Some of the Ways Video Is Changing How Business Is Being Done

    Brightcove Chief Marketing Officer Jennifer Smith discusses some of the ways video is changing how business is being done and key themes from Brightcove PLAY.

    Oct 6, 2021


    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at and via Reuters TV.

    Learn More