Samsung expects record third-quarter profits
Samsung Electronics estimated its July-September earnings rose 25 per cent to a record US$9.4 billion as a strong recovery in memory chip prices helped counter a slowdown in the South Korean company’s smartphone business.
The maker of the Galaxy S4 said its third-quarter operating profit likely increased to 10.1 trillion won (HK$73 billion). The guidance, released ahead of full quarterly results due out by October 25, was better than the average forecast of 9.96 trillion won in a poll of 34 analysts by Thomson Reuters I/B/E/S.
The South Korean firm estimated its third-quarter sales rose to 59 trillion won, versus a market forecast of 60 trillion won.
Samsung, which has reported record earnings every quarter since last year except the first three months of this year, is expected to post another round of record earnings in the current quarter as chip prices extend their gains.
The global memory chip market has rallied since late last year owing to a supply crunch caused by years of cautious investment to support prices, as well as conversion of factory capacity to produce more profitable chips used in smartphones and tablets.
The semiconductor market further tightened after a fire in early September at a plant in China owned by the world’s No 2 memory chipmaker, SK Hynix.
“The semiconductor and mobile divisions may have performed better than expected in the third quarter, helping Samsung post better-than-expected earnings,” said Choi Do-yeon, an analyst at Kyobo Securities.
“We expect earnings to improve to 10.7 trillion won in the current quarter, as computer memory chip prices are rising thanks to the fire at the Hynix plant.”
Samsung’s mobile-devices business, which accounts for about two-thirds of the company’s total profit, is struggling with weakening growth as the high-end segment of the smartphone market saturates, pushing sales of its flagship Galaxy S4 lower.
Analysts estimate S4 sales dropped to about 16 million handsets in the third quarter from some 20 million in the two months following the smartphone’s late April launch.
Profits at the mobile division may face further pressure in the current quarter as the company increases marketing expenses in the run-up to the year-end holiday shopping season, analysts say.