Business | Samsung beats forecasts as chips, screens outweigh handsets
Samsung's on fire... in a good way. Photo:  Reuters/Kim Hong-Ji
Samsung's on fire... in a good way. Photo: Reuters/Kim Hong-Ji

Samsung beats forecasts as chips, screens outweigh handsets

South Korean electronics giant brushes of Note7 calamity with strength in depth

January 6, 2017 11:01 AM (UTC+8)

Samsung Electronics said fourth-quarter profit jumped 50% from a year earlier to its highest level in more than three years, beating expectations on strong chip sales and a smartphone rebound, Reuters reported.

The strong earnings numbers come despite a slight fall in revenue and the anticipated US$2.1 billion hit to profit from the withdrawal of the fire-prone Galaxy Note 7 premium smartphone in October. The company issued the numbers in what it calls preliminary earnings before the release of full results in late January.

The result points to a more rapid recovery for the mobile business than many analysts had expected after one of the biggest product safety failures in tech history. It also reflects the persistent rise in chip prices spurred by Chinese demand and growth in displays using organic light-emit diodes.

“Samsung posted solid earnings only with sales of older smartphone models like the S7,”  Kim Sung-soo, a fund manager at LS Asset Management, told Reuters. “This makes me have hopes for the [Galaxy] S8. Should they fare well, I expect Samsung to report record earnings this year.”

Samsung said October-December operating profit would be 9.2 trillion won (US$7.8 billion), the highest since the third quarter of 2013 and well above the 8.2 trillion won tipped by a Thomson Reuters StarMine SmartEstimate from a survey of 21 analysts. The estimate was also higher than any individual forecast in the survey.  The average estimate in Bloomberg’s poll of analysts was for 8.29 trillion won.

The South Korean won’s recent depreciation may have helped boost profits at the world’s biggest maker of smartphones, TVs and memory chips as component sales are typically settled in US dollars. The local currency fell 8.8% against the dollar in the fourth quarter.

Investors pushed Samsung shares up 43% last year, betting the surge in demand for memory chips and organic light-emitting diode screens for smartphones will more than make up for the Note 7 setback and translate to strong earnings growth.

Analysts expect Samsung’s chip division to earn a record of more than 4 trillion won in operating profit in October-December thanks to strong demand from smartphone makers, including major client Apple Inc , and high-end data storage products. DDR3 4-gigabyte dynamic random access memory chips averaged US$2.48 in the fourth quarter, from US$1.75 in the previous three months, InSpectrum data show.

The mobile division’s quarterly profit is also expected to rebound from the third quarter, when the firm booked the bulk of its Note 7 losses, and post its first annual gain in three years thanks to healthy sales of Galaxy S7 smartphones.

Samsung Electronics said fourth-quarter revenue likely fell 0.6% from a year earlier to 53 trillion won.

Samsung is counting on its flagship Galaxy S line this year to repair its image and fire up a beleaguered mobile division, Bloomerg said. The next iteration of the phone is said to feature a bezel-less display and voice-enabled digital assistant. But the company’s also warned of slowing key markets and growing uncertainty around trade protectionism and currency fluctuations. Sales were 53 trillion won in the quarter, the company said, compared with the 52.1 trillion won forecast.

The company’s display division probably posted a profit of 1.1 trillion won. Earnings at the consumer electronics unit, which encompasses TVs and appliances, probably fell to 800 billion won because of rising panel prices, Bloomberg said.

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