Tech giant Samsung Electronics reported a surge in revenues and sales in the third quarter as the US ban on rival Huawei takes toll on its market share.
Samsung recorded revenues of $59 billion for the quarter, boosted by a 50% increase in smartphone sales and an 82% jump in profits from microchips, as the company takes market share away from Huawei amid the US ban on the Chinese tech firm.
Samsung benefitted from Huawei ban
The South Korean tech company posted a 49% increase in net profit over the same quarter last year, bringing the total to $8.3 billion for the period.
US sanctions on against its Chinese rival Huawei have been attributed with the surge in sales of Samsung's mobile and chip businesses.
A few months ago, the US slapped sanctions on Huawei and forced its allies, including the UK, to exclude the Chinese company from their 5G networks.
Defence Secretary Ben Wallace explained: "It is a better set of sanctions than the earlier set, and it’s specifically clearly designed in a smarter way to put countries that have high-risk vendors – specifically Huawei – under greater pressure."
Under the sanctions, Huawei and the third parties that manufacture its chips are prohibited from using "US technology and software to design and manufacture" its products.
As a result, the Chinese telecoms firm could lose access to software it relies on to design and test its processors, as well as well as the ability to produce its most advanced chips.
The US government has cited national security concerns as the basis for the sanctions. US officials have been suggesting that the Chinese government might use Huawei to spy on or even sabotage communications.
Last week, Huawei said its sales growth has slowed down after US sanctions kicked in and further blocked its access to key technology.
The Shenzhen-based firm reported a 10% growth in revenue, generating $101 billion for the first three quarters of 2020. However, this was a slower sales growth amid US sanctions for Huawei, who posted 24% increase in revenue for the first nine months of 2019.
While the company did not disclose detailed earnings, it mentioned that its net profit margin was 8%, which was slightly lower from the 8.7% it recorded last year.
Earlier forecasts, analysis and current performance
Earlier this month. Samsung said it is expecting its profit to increase by nearly 60% during the third quarter, possibly aiming to retake top position from struggling rival Huawei.
According to Samsung, it expects to make an operating profit of almost 12.3 trillion won or $10.6 billion for the July to September quarter, representing a 58% increase from the same period last year.
Lee Su-bin, an analyst with Daishin Securities, said: "Samsung is poised to see shipments of semiconductors and display panels to captive customers grow, fueled by increased sales."
"It stands to benefit more significantly than any of its peers from the ongoing ban on Huawei," Lee added.
In addition, Samsung's strong performance come amid ongoing consolidation in the US microchip industry, including AMD's plan to acquire Xilinx for $35 billion and graphics chipmaker Nvidia's deal to purchase British mobile chipmaker Arm from Softbank for $40 billion.
