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Samsung Electronics

Samsung profit tops estimates bolstered by memory chip sales

Samsung profit tops estimates on memory chip sales

PUBLISHED : Friday, 05 October, 2018, 8:40am
UPDATED : Friday, 05 October, 2018, 8:40am

Samsung Electronics Co. posted profit that topped analysts’ estimates on resilient sales of memory chips.

Operating income rose to 17.5 trillion won ($15.5 billion) in the three months ended September, according to preliminary results released Friday from the Suwon, South Korea-based company. That compares with the 17.2 trillion-won average of analysts’ estimates compiled by Bloomberg.

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The record profit eases concerns about a downturn in demand for memory chips, even though there’s some doubt whether customers will continue their buying next year. That’s weighing on the world’s biggest chipmaker, which is also struggling to boost its smartphone sales. Samsung shares have declined about 12 percent this year, compared with a 41 percent gain last year, when its annual earnings rose to an all-time high.

“Hitting a peak in the third quarter, earnings momentum is expected to slow as profit falls until the early part of next year,” Yoo Jong-woo, an analyst at Korea Investment & Securities, wrote in a report before the earnings announcement.

Sales for the third quarter were 65 trillion won, matching the average projection compiled by Bloomberg. Samsung won’t provide net income or break out divisional performance until it releases final results later this month.

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While Samsung leads the world in smartphones, it is being challenged by Chinese handset makers like Huawei, which overtook Apple Inc. to become the second-largest vendor in the June quarter according to IHS Markit. Samsung is pinning its hopes on a yet-to-be-unveiled smartphone with a bendable screen, as it taps into its know-how in organic light-emitting diodes screens, which it also supplies to Apple.

Memory chips account for the biggest portion of Samsung’s profit and buys the company time to shore up its smartphone sales. While contract prices for 32-gigabyte DRAM server modules fell 0.1 percent in the three months ended September, that was the first quarterly decline since 2016, according to InSpectrum Tech Inc. Prices for 128 gigabit MLC NAND flash memory chips fell about 6.9 percent.

Samsung plans to curtail growth in memory chip output next year to keep supplies tight amid an expected slowing in demand, Bloomberg News reported last month. Chip prices may rise as a result while Samsung reduces orders for equipment and materials. Korea Investment & Securities forecasts an 8 percent drop in investment in semiconductors next year as Samsung braces for a slowdown in demand.