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Samsung says profit jumped 23%, likely thanks to strong chip demand

Hong Kong (CNN Business) Samsung (SSNLF), the world's largest smartphone maker, predicts its profit jumped more than 20% last quarter, suggesting that the company has managed to withstand the fallout from the coronavirus pandemic.

The South Korean conglomerate said on Tuesday that it expects to make an operating profit of roughly 8.1 trillion won ($6.8 billion) for the three months that ended in June. That's up nearly 23% from the same period a year ago. The estimates also beat roughly 2% profit slump that analysts polled by data provider Refinitiv had predicted.

Samsung said it expects sales will fall about 7% to 52 trillion won ($43.6 billion). Analysts polled by Refinitiv had predicted 51.4 trillion in sales ($43 billion).

Shares in Samsung opened up 1.5% in Seoul, but later reversed those gains. The stock ended the day down 2.9%. South Korea's Kospi Index (KOSPI) closed down 1%.

Samsung said the estimates "include a one-time gain related to the display business." It did not otherwise elaborate on earnings, but will report full results for the second quarter at the end of this month.

Samsung — which supplies key parts like display panels and chips for companies such as Apple (AAPL) and Huawei — is among the first of the big tech companies to report earnings for the quarter, and its full report will be viewed as a bell weather for how tech giants are withstanding the pandemic.

The company has been enjoying a boost to its memory chip business thanks to Covid-19. Millions of people around the world continue to work, play games and watch movies from home, leading to strong chip demand from data centers, according to analysts.

Sales in Samsung's consumer electronics unit have taken a hit, however.

Smartphone sales in the second quarter likely "plunged to 55 million units," Daiwa analyst SK Kim wrote in a note last month. That would be a drop of more than 27% from the same period a year earlier, according to data from market research firm IDC.

But analysts say the consumer electronics division, which includes smartphone and TV sales, is still profitable because of ongoing work and travel restrictions.

Kim, along with Lee Subin, an analyst with Daishin Securities, said that despite disappointing sales, Samsung's smartphone unit likely enjoyed wider profit margins as the shutdown of retail stores means lower marketing costs.

Kim added that "reduced ... internal costs such as business travel due to Covid-19" also helped the smartphone division's bottom line.

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