Samsung sets quarterly profit, revenue records
However, Korea’s biggest company is facing challenges as its current portfolio is heavily dependent on computer chip sales. Its smartphone business is struggling as sales of its flagship Galaxy S9 smartphone sales failed to reach expectations.
According to Samsung Electronics’ guidance report on third-quarter performance, released on Friday, the company’s revenue grew 4.7 percent compared to a year ago to 65 trillion won ($57.5 billion) while its operating profit expanded by 20.4 percent to 17.5 trillion won. It is a new record for both quarterly revenue and operating profit. The earlier market consensus on Samsung Electronics’ operating profit was between 16.8 trillion won and 17.1 trillion won. Compared to the previous quarter, revenue was up 11.1 percent and operating profit was up 17.7 percent.
Although the guidance report did not give details on the earning performance of each business, market experts believe the company’s record-breaking performance was due to the company’s semiconductors.
The operating profit of the memory business is estimated to have increased by 36 percent to 13 trillion won, which would be an all-time record.
DRAM revenue is believed to have surged 47 percent year-on-year to around 14 trillion won while NAND flash was up more than 8 percent during the same period to 7 trillion won.
“The recent starting of additional production line manufacturing DRAM and NAND flash of the company’s memory plant in Pyeongtaek, Gyeonggi, is said to have contributed to the robust sales of the company’s memory chips,” said Doh Hyun-woo, NH Investment & Securities analyst.
The company’s display business is estimated to have improved sharply in the third quarter as well, contributed by Apple’s release of the latest iPhone, equipped with organic light-emitting diode (OLED) display, in September.
While the liquid-crystal display (LCD) business revenue is estimated to have dropped 28 percent, OLED business is estimated to have increased 35 percent year-on-year to over 7.5 trillion won. LCD prices have recently been falling on the attacks of low-price competition from Chinese companies. The overall display revenue is estimated to have increased 14 percent to around 9.5 trillion won.
On the contrary, Samsung’s mobile communication business is believed to have suffered. Sales of the Galaxy S9, which was released in the second quarter, are middling, and the company is believed to have spent a large amount on marketing the Galaxy Note9, which was released in August. This likely had an effect on the company’s operating profit.
In the third quarter, market analysts believe the mobile business dropped 9 percent to 25 trillion won, while operating profit fell nearly 30 percent year-on-year to 2.3 trillion won compared to the 3.3 trillion won recorded a year ago.
The company’s dependency on its semiconductor’s business is becoming an increasingly large concern.
“While the third quarter guidance report is positive in that it exceeds earlier market consensus, heavy dependency on semiconductor performance is a negative [for Samsung Electronics],” said Kim Yang-jae, analyst at KTB Investment & Securities. “[Samsung Electronics] is facing a slowdown on earnings momentum, as DRAM prices has been falling since the fourth quarter.”
DRAMeXchange, a computer chip market research firm, estimated that DRAM and NAND flash prices will fall in the fourth quarter compared to the third quarter due to difference between supply and demand. When compared to the third quarter, DRAMeXchange projected a 5 percent drop in the fourth quarter, sharper than earlier estimates of a 1 to 3 percent decline.
BY LEE HO-JEONG [email@example.com]
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It's a wrap