Samsung Electronics flags record third quarter operating profit

Seoul: Samsung Electronics on Friday forecast a record operating profit of 17.5 trillion won ($15.4 billion) in the third quarter led by solid demand for its memory chips.
Sales for July to September are expected to reach 65 trillion won, the world’s largest maker of smartphones and memory chips said in a regulatory filing.
The earnings forecast from the South Korean electronics giant beat market consensus of about 17.2 trillion won according to market researcher FnGuide, with analysts expecting a jump in profits on a strong performance by the company’s semiconductor unit.
Third-quarter operating profit was up 20.4 per cent from a year ago while sales jumped by 4.7 per cent.
“Operating profit seems to be at its peak now,” Greg Roh, an analyst at Hyundai Motor Securities, told Bloomberg News.
“Early next year might be the right time to buy Samsung before growth picks up again in the bottom half of next year,” he added.
Samsung shares rose as much as 1.8 per cent in early trading in Seoul.
Samsung withholds net profit and sector-by-sector business performance until it releases its final earnings report, which is expected later this month.
The South Korean tech giant has seen profits soar in recent years largely thanks to solid demand for memory chips for mobile devices which has helped offset weakening profits from its own mobile production.
Samsung’s chipmaking unit —currently dominating the global market after the firm invested tens of billions of dollars each year to build and expand factories — provides chips for its own devices as well as those of competitors including Apple.
But there are growing concerns over declining chip prices.
The price of DRAM products —used in mobile devices, servers and PCs — is expected to see a sharp drop of five per cent in the fourth quarter from the previous quarter on slowing demand, said TrendForce, a market research firm that tracks memory chip pricing. “DRAM products have begun to see a weak price trend since 3Q18 after the price growth of nine consecutive quarters,” said Avril Wu, a senior research director at DRAMeXchange, a unit of TrendForce.
Samsung plans to curtail growth in memory chip output next year to keep supplies tight amid an expected weakening demand, Bloomberg News reported last month.
Samsung’s mobile unit suffered a heavy blow after a damaging worldwide recall of its Galaxy Note 7 devices over exploding batteries in 2016, which cost the firm billions of dollars.
While it retains its leadership position in the global smartphone market, Samsung saw a dismal 22 per cent drop in mobile technology sales in the second quarter.
The South Korean firm also faces mounting competition from Chinese rivals like Huawei — which recently surpassed Apple in second place — with quality devices at cheaper prices, adding pressure on Samsung in a segment of the market it used to dominate.
Samsung plans to introduce cutting-edge features to its mid-priced Galaxy A series to attract “millennials who cannot afford the flagship”, its mobile division CEO DJ Koh said during an interview with CNBC last month.
Koh added that Samsung was close to concluding the development of a foldable smartphone and would be ready to unveil it this year. — AFP