Seoul: Samsung Electronics Co. reported better-than-projected profit on booming demand for displays and memory chips, while its newest smartphones take on Apple Inc. ahead of competitive year-end holiday sales.
Operating income almost tripled to a record 14.5 trillion won ($12.8 billion) in the three months ended September, according to preliminary results released Friday. That compares with the 14.3 trillion-won average of analysts’ estimates compiled by Bloomberg. Third-quarter revenue matched predictions at 62 trillion won.
The world’s largest maker of memory chips already posted record earnings in the previous quarter as everything from computer servers to artificial intelligence-driven devices fuels demand for semiconductors, driving up DRAM and NAND prices. Samsung, based in Suwon, South Korea, supplies the chips for smartphone makers as well as data center operators.
“It’s the chip prices that are driving up the profit rather than the sales volumes,” said Park Kang-ho, an analyst at Daishin Securities. “We’re expecting an operating profit of about 16 trillion won in the next quarter, and that means the boom in the semiconductor industry is more handsome than expected.”
The results don’t include net income or break out divisional performance. Final numbers are usually released two weeks later. Samsung’s shares fell less than 1% in Seoul on Friday after the results were released. They have climbed more than 50% this year.
Samsung is counting on the S8 and Note 8 smartphones released this year to recover from last year’s debacle with the Note 7. The company may benefit if Apple is unable to deliver a high volume of iPhone X smartphones as planned this year.
Samsung also leads in the next generation of screens called organic light-emitting diode displays, supplying them to Apple and other smartphone makers, even as it competes for dominance in the global market. It’s also seeking to release a phone with a bendable display next year to tighten the lead with Apple and fend off challenges from Huawei Technologies Co., Oppo and other Chinese rivals.
Still, the company’s chips business has remained robust, helped by strong demand for memory chips. Contract prices for 32 gigabyte DRAM server modules climbed 7.2 percent in the September quarter from the June period while prices for 128 gigabit MLC NAND flash memory chips rose 4.7% in the same period, according to inSpectrum Tech Inc.
“Resilient memory chip prices would be the biggest driver for a possible earnings beat,” said Anthea Lai, an analyst at Bloomberg Intelligence.
Samsung is also struggling to stem a further setback of its reputation from the August conviction of de-facto chief Jay Y. Lee, on charges he bribed a presidential confidante to secure support for a 2015 merger that cemented his control. Son of hospitalized chairman Lee Kun-hee, the 49-year-old businessman denies the charges and is appealing the conviction.
The trial is part of a bigger corruption scandal that brought down South Korea’s president and transfixed the nation as Lee received a five-year sentence. Samsung Electronics, of which he is a vice chairman and board member, is the crown jewel of a conglomerate comprised of about 60 units selling life insurance, cargo ships and clothes. Bloomberg