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Samsung Electronics Q2 profit likely up 38% on strong chip prices


People wears masks in front of a Samsung store at a main shopping area as the country is hit by an outbreak of the new coronavirus in downtown Shanghai, China February 21, 2020. REUTERS/Aly Song/File Photo

  • Q2 operating profit estimated at 11.3 trln won
  • Surging chip prices, shipments boost profit
  • Revenue estimated up 15.4%
  • Smartphones shipments likely fell on quarter

SEOUL, July 6 (Reuters) – Samsung Electronics Co Ltd (005930.KS) likely saw a 38% surge in profit for the April-June quarter thanks to strong chip prices and demand spurred by a pandemic-led consumer appetite for electronics as well as recovering investment in data centres.

Operating profit for the world’s biggest memory chip and smartphone maker likely jumped to 11.3 trillion won ($10 billion), according to a Refinitiv SmartEstimate drawn from 20 analysts and weighted toward those who are more consistently accurate.

The South Korean tech giant’s strong performance – coming despite it shipping fewer smartphones than in January-March – underscores the stratospheric demand for chips that has depleted stockpiles and filled production capacity.

The result would be up 20% from the first quarter and mark Samsung’s highest operating income for the second quarter since 2018. Revenue likely rose 15.4%.

Samsung is scheduled to announce preliminary second-quarter results on Wednesday.

The company’s chip division likely benefited from memory chip price hikes that exceeded market estimates, analysts said, while shipments grew as well.

Prices of DRAM chips, widely used in servers, mobile phones and other computing devices, jumped 27% compared to the March quarter, while those of NAND flash chips that serve the data storage market rose 8.6%, according to research provider Trendforce.

Profit also improved at Samsung’s chip-contract manufacturing and logic chip design business, partly because operations at its storm-hit Texas factory returned to normal, analysts said.

They estimated the chip division’s operating profit in April-June rose about 22% from the year-earlier period to about 6.6 trillion won.

Still, Samsung’s smartphone shipments dropped to about 59 million in April-June from about 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales slowed for its latest flagship model, launched in mid-January.

Reduced demand from India, hard hit by the pandemic during the quarter, as well as tight supply for some mobile processor chips may also have affected shipments, analysts said, estimating the mobile business’ operating profit at about 2.9 trillion won.

($1 = 1,129.2800 won)

Reporting by Joyce Lee; Additional reporting by Heekyong Yang; Editing by Sayantani Ghosh and Christopher Cushing

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EU deploys assistance for Cyprus as huge forest fire rages


NICOSIA, July 3 (Reuters) – The European Union on Saturday deployed aerial assistance to help Cyprus contain a huge forest fire raging north of the cities of Limassol and Larnaca, a blaze one official called the worst on record.

The blaze, fanned by strong winds, affected at least six communities in the foothills of the Troodos mountain range, an area of pine forest and densely vegetated shrubland.

The EU’s executive, the European Commission, said fire-fighting planes had departed from Greece to battle the fire and Italy was also planning to deploy aerial fire-fighters.

The EU’s emergency Copernicus satellite was also activated to provide damage assessment maps of the affected areas, the Commission said in a statement.

“It is the worst forest fire in the history of Cyprus,” Forestries Department Director Charalambos Alexandrou told Cyprus’s Omega TV.

Attempts were being made to prevent the blaze from crossing the mountains and stop it before reaching Machairas, a pine forestland and one of the highest peaks in Cyprus.

Alexandrou said the perimeter of the fire was “at least 40 kilometres”.

Dozens of properties were damaged, but no injuries were reported. There were widespread power cuts in the area. Plumes of smoke were visible in the capital Nicosia, some 75 km (45 miles) away.

Officials said that in addition to Greece’s assistance with two aircraft, help was also expected from Israel.

“This is a very difficult day for Cyprus. All of the state’s mechanisms are in gear, and the priority is for no loss of life,” Cypriot President Nicos Anastasiades tweeted.

Israel accepted Nicosia’s plea for help, a statement from Prime Minister Naftali Bennett said, and will send firefighting aircraft to Cyprus on Sunday.

The cause of the fire, which started around midday, was unclear. Cyprus has experienced a heatwave this week, with temperatures exceeding 40 Celsius (104 Fahrenheit). Police said they were questioning a 67 year old person in connection with the blaze.

“It passed through like a whirlwind, it destroyed everything,” said Vassos Vassiliou, the community leader of Arakapas, one of the communities affected.

Reporting by Michele Kambas, additional reporting by Maayan Lubell in Jerusalem and by John Chalmers in Brussels
Editing by Ros Russell, David Gregorio and Diane Craft

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U.S. opens $3 billion aviation manufacturing wage subsidy program


A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren/File Photo

WASHINGTON, June 15 (Reuters) – The U.S. Transportation Department said Tuesday it had launched a $3 billion aviation manufacturing payroll subsidy program that will cover up to half of eligible companies’ compensation costs for as long as six months.

The program, funded by Congress, requires companies to commit to not conducting furloughs without employee consent or laying off employees covered by subsidies during the six-month period. Applications must be filed by July 13.

Companies eligible include aircraft, engine, propeller or component manufacturers and companies that repair or overhaul airplanes and parts.

The subsidy program cannot cover more than 25% of an employer’s total U.S. workforce as of April 2020 and can only cover employees with total annual compensation of $200,000 or less.

To qualify, a company must have involuntarily furloughed or laid off at least 10% of its total workforce, or have experienced at least a 15% decline in 2020 total operating revenues.

More than 100,000 jobs have been lost in the aerospace industry since the start of the COVID-19 pandemic, according to the Transportation Department. Before then, the U.S. aerospace industry was estimated to employ approximately 2.2 million workers, including 1.2 million who worked in various parts of the supply chain nationwide.

Boeing Co (BA.N), which has had extensive job cuts, Raytheon Technologies (RTX.N) and Spirit Aerosystems (SPR.N) did not immediately respond to questions about whether they are considering applying. General Electric’s (GE.N) aviation unit said it would not seek assistance from the program.

The International Association of Machinists and Aerospace Workers had strongly urged Congress to fund the program.

Congress has provided assistance to other aviation industry firms, including giving U.S. airlines $54 billion for payroll since March 2020 and that funding will continue to pay much of airline workers’ salaries through Sept. 30.

Reporting by David Shepardson
Editing by Chizu Nomiyama

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U.S. downgrades Mexico air safety rating, offers assistance


Screens show flight information at the almost empty Benito Juarez international airport, as the spread of the coronavirus disease (COVID-19) continues in Mexico City, Mexico, June 11, 2020. REUTERS/Edgard Garrido

The United States on Tuesday downgraded Mexico’s aviation safety rating, an action that bars Mexican carriers from adding new U.S. flights and limits the ability of airlines to carry out marketing agreements with one another.

The U.S. Federal Aviation Administration, in announcing the action, said it is “fully committed to helping the Mexican aviation authority improve its safety oversight system to a level that meets” international standards. The agency also said it is “ready to provide expertise and resources” to resolve issues raised in the safety assessment process.

The FAA downgraded Mexico – the most common destination for U.S. air travelers last month – from a level called Category 1, which signifies compliance with international standards, to Category 2, the lowest level.

That rating, according to the FAA, means Mexico lacks “necessary requirements to oversee the country’s air carriers in accordance with minimum international safety standards, or the civil aviation authority is lacking in one or more areas such as technical expertise, trained personnel, record keeping, inspection procedures or resolution of safety concerns.”

The FAA action sent shares in Mexican airlines down.

A similar FAA downgrade of Mexico in 2010 over suspected shortcomings within its civil aviation authority lasted about four months. Only a few countries currently are rated Category 2 by the FAA, including Bangladesh, Pakistan, Thailand and Malaysia.

Plans for the FAA downgrade were first reported on Friday by Reuters. read more

The FAA said its reassessment of the Agencia Federal de Aviacion Civil from October 2020 through February identified several areas of non-compliance with minimum international safety standards.

The Mexican government did not immediately respond to a request for comment.

Mexican President Andres Manuel Lopez Obrador on Monday had urged U.S. authorities not to downgrade Mexico, arguing that his country was complying with all relevant norms.

The downgrade means current U.S. service by Mexican carriers is unaffected, but they cannot begin new flights. U.S. airlines also will no longer be able to market and sell tickets with their names and designator codes on Mexican-operated flights and the FAA will increase scrutiny of Mexican airline flights to the United States.

Mexico has been a top vacation spot for U.S. travelers during the COVID-19 pandemic, spurring U.S. airlines to redirect capacity they had previously flown to Europe before transatlantic travel restrictions were imposed last year.

Mexico was the by far the busiest foreign air destination in April – with nearly 2.3 million passengers on U.S.-Mexico flights – more than three times that of the Dominican Republic, the next most-popular country destination, according to industry data.

Delta Air Lines said on Tuesday an FAA downgrade was not about (DAL.N) its partner Aeromexico (AEROMEX.MX) and that the action will have little impact on customers. read more

Delta said it will need to reissue reservations for some Aeromexico operated flights that were booked through Delta.

“This is not about Aeromexico. This is about the Mexican version of the FAA not having some of the right protocols in place,” Delta president Glen Hauenstein said at a Wolfe Research conference.

Delta has a codeshare arrangement with Aeromexico enabling the two air carriers to sell seats on each other’s flights. Delta will be forced to remove its codes on Aeromexico flights following the downgrade, though Aeromexico could continue to code on Delta flights and members of Delta’s loyalty program could still receive SkyMiles on Aeromexico flights that would normally carry the code, Hauenstein added.

Pablo Casas, general director of the National Institute of Legal-Aeronautical Research think tank, said the downgrade could impact the Mexican economy and carriers trying to recover from the business effects of the pandemic.

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Toshiba unit hacked by DarkSide, conglomerate to undergo strategic review


A Toshiba Corp (6502.T) unit said it was hacked by the DarkSide ransomware group, overshadowing an announcement of a strategic review for the Japanese conglomerate under pressure from activist shareholders to seek out suitors.

Toshiba Tec Corp (6588.T), which makes products such as bar code printers and is valued at $2.3 billion, was hacked by DarkSide – the group widely believed to be behind the recent Colonial Pipeline attack, its French subsidiary said.

It added, however, that only a minimal amount of work data had been lost.

“There are around 30 groups within DarkSide that are attempting to hack companies all the time, and they succeeded this time with Toshiba,” said Takashi Yoshikawa, a senior malware analyst at Mitsui Bussan Secure Directions.

Employees accessing company computer systems from home during pandemic lockdowns have made firms more vulnerable to cyber attacks, he added.

Screenshots of DarkSide’s post provided by the cybersecurity firm said more than 740 gigabytes of information was compromised and included passports and other personal information.

Reuters could not access DarkSide’s public-facing website on Friday. Security researchers said DarkSide’s multiple websites had stopped being accessible.

Ransomware attacks have increased in number and amount of demands, with hackers encrypting data and seeking payment in cryptocurrency to unlock it. They increasingly release stolen data as well, or threaten to unless they are paid more.

Ireland’s health service said on Friday it had shut down its IT systems after what it described as a “significant” ransomware attack. read more

Investigators in the U.S’s Colonial case say the attack software was distributed by DarkSide, which includes Russian speakers and avoids hacking targets in the former Soviet Union. DarkSide lets “affiliates” hack into targets elsewhere, then handles the ransom negotiation and data release. read more

STRATEGIC REVIEW

Amid calls from shareholders to explicitly seek offers from potential suitors after dismissing a $20 billion take-private bid from CVC Capital this year, Toshiba said it was setting up a strategic review committee and had appointed UBS (UBSG.S) as financial adviser.

Reporters raise their hands for a question during a Toshiba news conference at the company headquarters in Tokyo, Japan, June 23, 2017. REUTERS/Issei Kato

The review will be conducted by independent directors and is designed to help the board consider a new business plan to be put forward by management by October.

The CVC offer faced strong opposition within the company. Its plan to retain management was perceived by some as aimed at shielding former CEO Nobuaki Kurumatani from activist shareholders.

At a briefing by the company on Friday, 3D Investment Partners and Farallon Capital Management, its No. 2 and No. 3 shareholders respectively, both criticised Toshiba for appearing reluctant to consider offers to go private.

Chief Executive Satoshi Tsunakawa responded that the company has “no reluctance to consider various proposals to increase corporate value, including going private.”

Sources have said other private equity investors such as KKR & Co Inc (KKR.N) and Bain Capital are interested in Toshiba. read more

However, the Asahi newspaper reported on Friday that Bain Capital is not considering buying Toshiba, citing an interview with Yuji Sugimoto, the head of Bain Capital’s Japan operations.

Battered by accounting scandals, massive writedowns for its U.S. nuclear business as well as the sale of its chip unit, Toshiba is a shadow of its former self.

But it remains one of Japan’s few manufacturers of nuclear power reactors and makes defence equipment, meaning any sale of would require government approval.

Toshiba on Friday forecast a 63% rise in annual operating profit to 170 billion yen ($1.6 billion), rebounding from pandemic-induced pain in the last year and as restructuring measures bear fruit. That follows a 20% slide in profit last year.

Toshiba also nominated four new board members after Kurumatani resigned last month. Kurumatani had been under fire due to allegations that investors were pressured before a shareholder meeting last year to support desired board nominations.

Shareholders in March successfully voted for an independent investigation into those allegations, marking a watershed victory for corporate governance in Japan. The probe is due to conclude before this year’s annual general meeting on June 25.

The board nominations announced on Friday included George Olcott, a former UBS banker who is also an independent board member at Japanese beer maker Kirin Holdings (2503.T).

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EXCLUSIVE China’s Tencent in talks with U.S. to keep gaming investments -sources


Tencent Holdings Ltd (0700.HK) is negotiating agreements with a U.S. national security panel that would allow it to keep its ownership stakes in U.S. video game developers Riot Games and Epic Games, according to people familiar with the matter.

Tencent has been in talks with the Committee on Foreign Investment in the United States (CFIUS), which has the authority to order the Chinese technology giant to divest U.S. holdings, since the second half of last year, the sources said.

CFIUS has been looking in to whether Epic Games’ and Riot Games’ handling of the personal data of their users constitutes a national security risk because of their Chinese ownership, the sources added.

Tencent owns a 40% stake in Epic Games, the maker of popular video game Fortnite. Tencent also bought a majority stake in Riot Games in 2011 and acquired the rest of the company in 2015. Riot Games is the developer of “League of Legends,” one of the world’s most popular desktop-based games.

Tencent is negotiating risk-mitigation measures with CFIUS so it can keep its investments, according to the sources. The details of the proposed measures could not be learned. They typically involve ringfencing the owner of a company from operations that have national security implications. They often call for the appointment of independent auditors to monitor the implementation of these agreements.

One of the sources said Epic Games has not been sharing any user data with Tencent.

The sources cautioned there is no certainty that Tencent will clinch deals to keep its investments and asked not to be identified because the matter is confidential.

A Tencent logo is seen in Beijing, China September 4, 2020. REUTERS/Tingshu Wang

Tencent, Epic Games and a CFIUS representative at the U.S. Treasury Department declined to comment.

A Riot Games spokesman said the Los Angeles-based company operates independently of Tencent and that it has implemented “industry-leading practices” to protect player data. He declined to comment on Riot Games’ discussions with CFIUS.

CFIUS has been cracking down on Chinese ownership of U.S. technology assets in the last few years, amid an escalation in tensions between Washington and Beijing over trade, human rights and the protection of intellectual property. U.S. officials have expressed concerns that the personal data of U.S. citizens could end up in the hands of China’s Communist Party government.

President Joe Biden’s administration has maintained the hawkish stance against China inherited in January from his predecessor Donald Trump, albeit with more of a focus on geopolitical issues such as the future of Taiwan and Hong Kong, as well as China’s persecution of the Uyghurs in Xinjiang.

Yet many key CFIUS roles have not yet been staffed. This has provided a reprieve to China’s ByteDance, which was ordered by Trump last year to sell its popular short video app TikTok but balked at a transaction that would have involved Oracle Corp (ORCL.N) and Walmart Inc (WMT.N). CFIUS has not sought to enforce the divestiture order under Biden.

Epic is locked in a legal fight with Apple Inc (AAPL.O) over access to the iPhone maker’s app store. It alleges that Apple forces developers to use its in-app payment systems – which charge commissions of up to 30% – and to submit to app-review guidelines that discriminate against products that compete with Apple’s own.

Apple argues that Epic Games broke their contract when it introduced its own in-app payment system in Fortnite to circumvent Apple’s commissions. It says the way it runs the app store inspires trust in consumers to open up their wallets to unknown developers. read more

Tencent’s vast businesses include video games, content streaming, social media, advertising and cloud services. China has in recent months sought to curb the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd (9988.HK), in a clampdown backed by President Xi Jinping. Reuters reported last week that Beijing was preparing a substantial antitrust fine for Tencent. read more

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