Samsung reports record quarterly profit
Samsung Electronics expects booming memory chip sales to continue to drive its earnings in the third quarter amid tight supply, although momentum in its display and mobile businesses may slow.
The upbeat outlook came after the company reported record profits for the quarter ended June to become the world’s most profitable technology company, driven by surging chip demand from mobile devices and data servers.
“Looking ahead to the third quarter, the company expects favourable semiconductor conditions to continue, although overall earnings may slightly decline quarter on quarter as earnings weaken for the display panel and mobile businesses,” the company said on Thursday.
Samsung expects the memory chip boom to continue in the second half and sales of flexible OLED panels used in high-end smartphones to increase, although growing price pressure amid rising LCD supply remains a concern.
Net profit surged 89 per cent to a record Won11tn in April-June, beating a median estimate of Won9.8tn from analysts surveyed by Bloomberg. Operating profit jumped 73 per cent to Won14tn, while sales grew 20 per cent to Won61tn.
The semiconductor division was the company’s key earnings driver, with operating profit of Won8tn, which accounted for half its operating profit.
Samsung has overtaken Intel as the world’s largest chipmaker in the last quarter, according to analyst estimates, thanks to a memory chip supercycle, that has doubled Dram prices over the past year.
“The explosion of emerging technologies in recent years — from the internet of things to cloud computing to big data — has been a critical force in initiating and driving today’s semiconductor ‘super cycle’,” said Aftab Jamil, partner and leader of BDO’s global technology practice. “The anticipated number of connected devices within the next few years is moving at a staggering pace and the range of such devices from wearables to autonomous cars is incredibly diverse.”
For the second half of 2017, Samsung expects “strong industry demand from flagship smartphone launches and expansion of new data centres, while restricted supply conditions will also remain”, it said in a statement.
Its executives told analysts it would refrain from just competing for market share and would focus on profitability.
The company’s mobile division posted Won4.1tn of second-quarter operating profit, driven largely by the launch of its Galaxy S8 flagship smartphone. Analysts expect an additional earnings boost from its refurbished version of the recalled Note 7 smartphone, which went on sale in its home market this month.
Samsung’s display panel business recorded operating profit of Won1.7tn, on increased sales of premium OLED displays and big-screen LCD panels. OLED panel sales are likely to increase in the second half, as the company is widely expected to supply OLED panels for Apple’s upcoming iPhone due later this year.
The strong earnings came as Samsung expects a verdict on the high-profile legal case involving its billionaire heir Lee Jae-yong, who is accused of bribery and embezzlement in connection to a corruption scandal that toppled the country’s former president Park Geun-hye. Prosecutors are expected to seek a long prison sentence for Mr Lee next Friday with the lower court ruling due next month. Mr Lee has denied any wrongdoing.
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