Samsung projects record Q3 performance
The company is projecting 62 trillion won ($55 billion) in revenue and 14.5 trillion won in operating profit for the third quarter. Compared to last year, revenue jumped 29.7 percent and operating profit more than doubled, soaring 178.9 percent.
From the second quarter, Samsung’s last record-breaking quarter, revenue increased by 1.6 percent and operating profit by 3.1 percent.
With such rapid growth, the company has already achieved an accumulated 38.46 trillion won in operating profit through third quarter, exceeding the 36.79 trillion won operating profit it made throughout 2013.
Although the report did not break down earnings by business division, industry analysts expect Samsung’s cash cow, semiconductors, to have accounted for nearly 10 trillion won, or 68 percent, of operating profit.
The tech giant has been riding on a wave of robust worldwide demand for memory chips of ever-higher capacity. In the fourth quarter last year, the semiconductor business brought in 4.95 trillion won profit, but the figure grew to 6.31 trillion won in the first quarter this year and 8.03 trillion won in the last quarter.
“While prices of both DRAM and NAND remained on an upward trend, shipments of NAND in particular expanded sharply, following the operation of the new 3-D NAND Pyeongtaek fab,” Do Hyun-woo, an analyst at Mirae Asset Daewoo, said, referring to two of Samsung’s memory chips.
The company’s Pyeongtaek production line in Gyeonggi began operations in July.
“Samsung Electronics’ advanced technology in the memory sector is likely to further solidify its position as global leader and support healthy margins,” Fitch Ratings said in a statement Thursday.
However, the company’s IT and mobile communications division, which is in charge of smartphones, is expected to have slipped quarter-on-quarter to around 3.3 trillion won, according to local securities firms.
“We see the launch of new flagship models, such as the Galaxy Note8, as sustaining cash flows rather than improving profit because intensifying competition in the premium segment will require increased marketing spending,” Fitch said in a statement.
Song Myeong-seop at Hi Investment and Securities said increased marketing costs for the company’s budget models and slowing sales of both the Note8 and S8 could weigh on earnings in the fourth quarter.
While Samsung has not failed to surprise with its recent quarterly reports, the task of maintaining momentum in the coming years and finding profit drivers outside memory chips still remains.
“Samsung is pouring in massive cash to maintain a definite lead in the global semiconductor market, which is why there is great risk,” said Song Yong-ho, an electrical engineering professor at Hanyang University. “To keep a competitive edge in chip technology even under China’s chase, the electronics giant needs to quickly look for a future growth engine other than semiconductors.”
On the same day the earnings forecast was released, the head of Samsung’s semiconductor division, Kwon Oh-hyun, delivered a similar message to the group, stressing that the company needed to reform and diversify.
Kwon announced his intent to resign from his position to make way for new faces.
Shares of Samsung Electronics dropped 1.5 percent to close at 2,700,000 won on Friday after the two announcements.
BY KIM JEE-HEE, LIM MI-JIN [email@example.com]
with the Korea JoongAng Daily
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